Unassociated Document
As filed with the Securities and
Exchange Commission on March 26,
2010
Registration
No. 333-164563
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
DC 20549
FORM
S-3
REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933
ZION
OIL & GAS, INC.
(Exact
name of registrant as specified in its charter)
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Delaware
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20-0065053
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(State
or other jurisdiction of incorporation or organization)
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(I.R.S.
Employer Identification Number)
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6510
Abrams Road, Suite 300
Dallas,
Texas 75231
(214)
221-4610
(Address,
including zip code, and telephone number, including area code
of
registrant’s principal executive offices)
Richard
Rinberg
Chief
Executive Officer
6510
Abrams Road, Suite 300
Dallas,
Texas 75231
(214)
221-4610
(Name,
address, including zip code, and telephone number, including area code, of agent
for service)
Copies
to:
David
Aboudi, Esq.
Aboudi
& Brounstein
3
Gavish Street
Kfar
Saba, 44641, Israel
+972-9-764-4833
Approximate
date of commencement of proposed sale to the public: From time to time after the
Registration Statement becomes effective.
If the
only securities being registered on this form are being offered pursuant to
dividend or interest reinvestment plans, please check the following box.
o
If any of
the securities being registered on this form are to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act of 1933, other
than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. x
If this
form is filed to register additional securities for an offering pursuant to Rule
462(b) under the Securities Act, please check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. o
If this
form is a post-effective amendment filed pursuant to Rule 462(c) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering. o
If this
form is a registration statement pursuant to General Instruction 1.D. or a
post-effective amendment thereto that shall become effective upon filing with
the Commission pursuant to Rule 462(e) under the Securities Act, check the
following box. o
If this
form is a post-effective amendment to a registration statement filed pursuant to
General Instruction 1.D. filed to register additional securities or additional
classes of securities pursuant to Rule 413(b) under the Securities Act, check
the following box. o
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b- 2 of the Exchange Act.
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Large
accelerated filer ¨
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Accelerated
filer x
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Non-accelerated
filer ¨
(Do
not check if a smaller reporting company)
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Smaller
reporting company o
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CALCULATION
OF REGISTRATION FEE
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Proposed Maximum Aggregate
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Title of Class of Securities to be Registered (1)
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Offering Price (2)
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Amount of Registration Fee(3)
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Common
Stock, par value $.01 per share
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— |
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— |
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Debt
Securities
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— |
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— |
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Warrants
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— |
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— |
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| Rights |
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— |
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— |
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Units
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— |
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— |
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Total
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$ |
50,000,000 |
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$ |
$3,565. |
(4)
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(1)
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There are being
registered hereunder such indeterminate number of shares of common stock,
such indeterminate principal amount of debt securities, such indeterminate
number of warrants to purchase common stock or debt securities, rights to
purchase an indeterminate number of securities of Zion Oil & Gas, Inc.
and such indeterminate number of units as shall have an aggregate initial
offering price not to exceed $50,000,000. If any debt securities are
issued at an original issued discount, then the offering price of such
debt securities shall be in such greater principal amount as shall result
in an aggregate initial offering price not to exceed $50,000,000, less the
aggregate dollar amount of all securities previously issued hereunder. Any
securities registered hereunder may be sold separately or as units with
other securities registered hereunder. The proposed maximum initial
offering price per unit will be determined, from time to time, by the
registrant in connection with the issuance by the registrant of the
securities registered hereunder. The securities registered also
include such indeterminate number of shares of common stock and amount of
debt securities as may be issued upon conversion of or exchange for debt
securities that provide for conversion or exchange, upon exercise of
warrants or pursuant to the antidilution provisions of any such
securities. In addition, pursuant to Rule 416 under the Securities Act,
the shares being registered hereunder include such indeterminate number of
shares of common stock as may be issuable with respect to the shares being
registered hereunder as a result of stock splits, stock dividends or
similar transactions.
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(2)
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The
proposed maximum aggregate offering price per class of security will be
determined from time to time by the registrant in connection with the
issuance by the registrant of the securities registered hereunder and is
not specified as to each class of security pursuant to General Instruction
II.D. of Form S-3 under the Securities
Act.
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(3)
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Calculated
pursuant to Rule 457(o) under the Securities Act of 1933, as
amended.
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The
Registrant hereby amends this Registration Statement on such date or dates as
may be necessary to delay its effective date until the Registrant shall file a
further amendment which states that this Registration Statement shall thereafter
become effective in accordance with Section 8(a) of the Securities Act of 1933,
as amended, or until the Registration Statement shall become effective on such
date as the Securities and Exchange Commission, acting pursuant to said Section
8(a), may determine.
Subject to Completion, Dated
______ ,
2010
THE
INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT
SELL THESE SECURITIES OR ACCEPT AN OFFER TO BUY THESE SECURITIES UNTIL THE
REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS
EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS
NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE OR JURISDICTION
WHERE THE OFFER OR SALE IS NOT PERMITTED.
PROSPECTUS
$50,000,000
ZION
OIL & GAS, INC.
Common
Stock, Debt Securities, Warrants, Units and Rights
This
prospectus is part of a registration statement that we filed with the Securities
and Exchange Commission using a “shelf” registration process. From time to time,
we may offer up to $50,000,000 of any combination of the securities described in
this prospectus, either individually or in units.
This
prospectus provides a general description of the securities we may offer.
Each time we sell securities, we will provide specific terms of the securities
offered in a supplement to this prospectus. The prospectus supplement may
also add, update or change information contained in this prospectus. You
should read this prospectus and the applicable prospectus supplement carefully
before you invest in any securities.
Shares
of our common stock and common stock purchase warrants have, since September 2,
2009, been trading on the NASDAQ Global Market under the symbols “ZN” and
“ZNWAW”, respectively. From January 3, 2007 and through September 1, 2009,
shares of our common stock were traded on the NYSE Amex, also under
the symbol “ZN” and from February 3, 2008 to September 1, 2009 shares of our
common stock purchase warrants traded under the symbol “ZN.WS. The last sale
price of our common stock on the NASDAQ Global Market on March 25,
2010 was $6.31.
The applicable prospectus supplement will contain information, where applicable,
as to any other listing on NASDAQ Global Market or any securities market or
other exchange of the securities, if any, covered by the prospectus
supplement.
Investing
in our securities involves a high degree of risk. We urge you to carefully
consider the risks that we have described on page 10 of this
prospectus under the caption “Risk Factors.” We may also include specific risk
factors in supplements to this prospectus under the caption “Risk Factors.” This
prospectus may not be used to offer or sell our securities unless accompanied by
a prospectus supplement.
We will
sell these securities directly to investors, through agents designated from time
to time or to or through underwriters or dealers. For additional information on
the methods of sale, you should refer to the section entitled “Plan of
Distribution” in this prospectus. If any underwriters are involved in the
sale of any securities with respect to which this prospectus is being delivered,
the names of such underwriters and any applicable commissions or discounts will
be set forth in a prospectus supplement. The price to the public of
such securities and the net proceeds we expect to receive from such sale will
also be set forth in a prospectus supplement.
NEITHER
THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS
APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OR
ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
The date
of this prospectus is _____, 2010.
Table
of Contents
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Page
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About
this Prospectus
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5
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Special
Note Regarding Forwarding Looking Statements
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5
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Summary
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6
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Risk
Factors
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10
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Use
of Proceeds
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15
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Description
of Common Stock
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15
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Description
of Debt Securities
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17
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Description
of Warrants
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23
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Description
of Units
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24
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Description
of Rights
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25
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Legal
Ownership of Securities
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26
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Plan
of Distribution
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29
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Legal
Matters
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30
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Experts
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30
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Where
You Can Find More Information
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31
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Incorporation
of Certain Information By Reference
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31
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ABOUT
THIS PROSPECTUS
This
prospectus is a part of a registration statement that we filed with the
Securities and Exchange Commission, or SEC, utilizing a “shelf” registration
process. Under this shelf registration process, we may sell any combination of
the securities described in this prospectus in one or more offerings up to a
total dollar amount of $50,000,000. This prospectus provides you with a general
description of the securities we may offer. Each time we sell securities
under this shelf registration, we will provide a prospectus supplement that will
contain specific information about the terms of that offering. The
prospectus supplement may also add, update or change information contained in
this prospectus. You should read both this prospectus and any prospectus
supplement together with additional information described under the heading
“Where You Can Find More Information.”
You
should rely only on the information provided or incorporated by reference in
this prospectus or any prospectus supplement. We have not authorized any dealer,
salesman or other person to give any information or to make any representation
other than those contained or incorporated by reference in this prospectus and
the accompanying supplement to this prospectus. You must not rely upon any
information or representation not contained or incorporated by reference in this
prospectus or the accompanying prospectus supplement. This prospectus and the
accompanying supplement to this prospectus do not constitute an offer to sell or
the solicitation of an offer to buy any securities other than the registered
securities to which they relate, nor do this prospectus and the
accompanying supplement to this prospectus constitute an offer to sell or the
solicitation of an offer to buy securities in any jurisdiction to any person to
whom it is unlawful to make such offer or solicitation in such jurisdiction. You
should not assume that the information contained in this prospectus and the
accompanying prospectus supplement is accurate on any date subsequent to the
date set forth on the front of the document or that any information we have
incorporated by reference is correct on any date subsequent to the date of the
document incorporated by reference, even though this prospectus and any
accompanying prospectus supplement is delivered or securities sold on a later
date. In this prospectus and any prospectus supplement, unless otherwise
indicated, the terms “Company,” "we," "our" and "us" refer to Zion Oil
& Gas, Inc., a corporation incorporated in the State of
Delaware.
THIS
PROSPECTUS MAY NOT BE USED TO OFFER AND SELL SECURITIES UNLESS IT IS ACCOMPANIED
BY A PROSPECTUS SUPPLEMENT.
SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This
prospectus and the documents included or incorporated by reference in this
prospectus contain statements concerning our expectations, beliefs, plans,
objectives, goals, strategies, future events or performance and underlying
assumptions and other statements that are not historical facts. These statements
are "forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. You generally can identify our forward-looking
statements by the words "anticipate," "believe," "budgeted," "continue,"
"could," "estimate," "expect," "forecast," "goal," "intend," "may," "objective,"
"plan," "potential," "predict," "projection," "scheduled," "should," "will" or
other similar words. These forward-looking statements include, among others,
statements regarding:
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our
ability to explore for and develop natural gas and oil resources
successfully and economically;
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our
estimates of the timing and number of wells we expect to drill, other
exploration activities and the cost of those activities;
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changes
in our drilling plans and related budgets;
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the
quality of our license areas with regard to, among other things, the
existence of reserves in economic
quantities;
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anticipated
trends in our business;
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our
future results of operations;
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our
liquidity and our ability to raise capital to finance our exploration and
development activities;
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our
capital expenditure program;
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future
market conditions in the oil and gas industry;
and
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the
impact of governmental regulation.
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More
specifically, our forward-looking statements include, among others, statements
relating to our schedule, business plan, targets, estimates or
results of future drilling, including the number, timing and results of wells,
the timing and risk involved in drilling follow-up wells, planned expenditures,
prospects budgeted and other future capital expenditures, risk profile of oil
and gas exploration, acquisition of seismic data (including number, timing and
size of projects), planned evaluation of prospects, probability of prospects
having oil and natural gas, expected production or reserves, increases in
reserves, acreage, working capital requirements, hedging activities, the ability
of expected sources of liquidity to implement our business strategy, future
hiring, future exploration activity, production rates, all and any other
statements regarding future operations, financial results, business plans and
cash needs and other statements that are not historical facts.
Such
statements involve risks and uncertainties, including, but not limited to, those
relating to our dependence on our exploratory drilling activities, the
volatility of oil and natural gas prices, the need to replace reserves depleted
by production, operating risks of oil and natural gas operations, our dependence
on our key personnel, factors that affect our ability to manage our growth and
achieve our business strategy, risks relating to our limited operating history,
technological changes, our significant capital requirements, the potential
impact of government regulations, adverse regulatory determinations, litigation,
competition, the uncertainty of reserve information and future net revenue
estimates, property acquisition risks, industry partner issues, availability of
equipment, weather and other factors detailed herein and in our other filings
with the SEC.
We have
based our forward-looking statements on our management's beliefs and assumptions
based on information available to our management at the time the statements are
made. We caution you that assumptions, beliefs, expectations, intentions and
projections about future events may and often do vary materially from actual
results. Therefore, we cannot assure you that actual results will not differ
materially from those expressed or implied by our forward-looking
statements.
Some
of the factors that could cause actual results to differ from those expressed or
implied in forward-looking statements are described under "Risk Factors" in this
prospectus and described under "Risk Factors" and elsewhere in our Annual
Reports on Form 10-K for the fiscal years ended December 31, 2009 and 2008
and in our other periodic reports filed with the SEC. Should one or more of
these risks or uncertainties materialize, or should underlying assumptions prove
incorrect, actual outcomes may vary materially from those indicated. All
subsequent written and oral forward-looking statements attributable to us or
persons acting on our behalf are expressly qualified in their entirety by
reference to these risks and uncertainties. You should not place undue reliance
on our forward-looking statements. Each forward-looking statement speaks only as
of the date of the particular statement, and we undertake no duty to update any
forward-looking statement.
SUMMARY
The
following is only a summary, and does not contain all of the information that
you need to consider in making your investment decision. We urge you to read
this entire prospectus, including the more detailed financial statements, notes
to the financial statements and other information incorporated by reference
into this prospectus under “Where You Can Find More Information” and
“Incorporation of Certain Information by Reference” from our other filings with
the SEC, as well as any prospectus supplement applicable to an offering of the
securities registered pursuant to the registration statement of which this
prospectus forms a part. Investing in our securities involves risks. Therefore,
please carefully consider the information provided under the heading "Risk
Factors" beginning on page 10.
Our
Company
Zion
Oil and Gas, Inc. is a development stage oil and gas exploration company with a
history of over nine years of oil and gas exploration in Israel. We have no
revenues or operating income and we are classified as an "exploration stage"
company. Our executive offices are located at 6510 Abrams Road, Suite 300,
Dallas, Texas 75231, and our telephone number is (214) 221-4610. Our office in
Israel is located at 15 Bareket Street, North Industrial Park Caesarea, 38900,
Israel, and the telephone number is +972-4-623-1425. Our website is
www.zionoil.com. We were incorporated in Florida on April 6, 2000 and
reincorporated in Delaware on July 9, 2003.
We
currently hold two exploration licenses covering approximately 162,100 acres
onshore in the State of Israel between Netanya in the south and Haifa in the
north. The areas have been subject to a series of exploration permits and
licenses that have been granted to and held by us pursuant to the Israeli
Petroleum Law. In June 2009, we were advised by the Israel Petroleum
Commissioner that we were awarded a preliminary exploration permit with priority
rights on approximately an additional 165,000 acres onshore Israel. The permit
was formally awarded in August 2009 and allows us to conduct, on an exclusive
basis through February 23, 2011, preliminary investigations, except for test
drilling, to ascertain the prospects for discovering petroleum in the area
covered by the permit. The permit area is adjacent to and to the east
of our current license areas. The new permit, which we have named as the
Issachar-Zebulun Permit, extends our petroleum rights from the Mediterranean at
Caesarea across the Carmel Mountains to Megiddo and through to the Jordan River
immediately south of the Sea of Galilee. The Issachar-Zebulun Permit
allows us to conduct, on an exclusive basis through February 23, 2011,
preliminary investigations to ascertain the prospects for discovering petroleum
in the area covered by the permit. Unlike a license area, where test
drilling may take place, no test drilling is allowed on a permit
area.
Since
April 2000, we have been conducting data accumulation, research and analysis
related to onshore oil and gas potential in the northern portion of Israel's
central coastal plain and the adjacent foothills region and Mt. Carmel range. In
January 2008, we completed the acquisition of approximately 52.5 kilometers
within the Asher-Menashe License area. Utilizing these seismic lines,
along with other lines already existing in our Israeli country-wide seismic
database, allowed us to better understand and interpret the geology of our
license areas and select drill sites within the licenses. Our database consists
of 219 seismic sections totaling 3,100 kilometers of coverage and also includes
the stratigraphic sections from all the wells drilled in Israel.
To date,
we have completed drilling two exploratory wells in the Joseph License area. The
first exploratory well, named the Ma’anit #1 well, was drilled to a depth of
15,842 feet (4,829 meters) to the Triassic formation with encouraging but
inconclusive results. However, notwithstanding these results, due to the
mechanical condition of the well-bore, we determined that the well was incapable
of producing oil and/or gas in commercial quantities and, consequently, in June
2007 we abandoned the well. In 2009, utilizing the 2,000 horsepower drilling rig
which was refurbished to meet our needs and brought into Israel, we drilled an
additional well (the Ma’anit-Rehoboth #2 well), ‘directionally’ form Ma’anit #1
well, to a depth of 17,913 feet (5,460 meters). The purpose of the
Ma’anit-Rehoboth #2 well was to appraise the apparent findings of the Ma’anit #1
in the Triassic (at a depth of between approximately 12,000 and 15,400 feet) and
to test the deeper Permian horizons at a depth of between approximately (16,000
and 18,000 feet). During the drilling, we had positive
indications that the Ma’anit-Rehoboth #2 well contained hydrocarbon bearing
zones, although we were only able to penetrate Triassic age formations and did
not reach the Permian geological layer. At the site of the Ma’anit-Rehoboth #2
well, the Permian layer is significantly deeper than we
anticipated. Subsequent to drilling the Ma’anit-Rehoboth #2 well and
after analysis of all the data collected, we identified several ‘zones of
interest' warranting further investigation.
In
December 2009, during a routine workover of the Ma’anit-Rehoboth #2 well,
utilizing a work-over rig that was specifically refurbished for this purpose, we
retrieved a small quantity of crude oil which came from the open hole section
below the last casing point at 15,830 feet (4,825 meters). We are
undertaking various testing procedures to clarify the recoverable hydrocarbon
potential of the Ma’anit-Rehoboth #2 well, if any, in order to test the
identified ‘zones of interest’ individually. At this stage, we are unsure as to
whether we have made a discovery of any hydrocarbon reservoir or, if such a
reservoir exists, whether it would be commercially viable. In February 2010, we
began completion and production testing of the Ma’anit-Rehoboth #2
well.
On
October 20, 2009, utilizing the 2,000 horsepower drilling rig used to drill our
Ma’anit-Rehoboth #2 well, we commenced drilling an additional well (the Elijah
#3 well). Under the terms of our license, the well must be drilled to a minimum
depth of approximately 14,800 feet (4,500 meters) on the Asher-Menashe License.
We targeted the Elijah #3 well to be drilled to the Triassic geological
formation, which is expected below approximately 10,000 feet (3,048
meters). We also planned to continue drilling to the Permian
geological formation, down to a total depth below 17,000 feet (5,182 meters). As
of January 15, 2010, we drilled the Elijah #3 well to a depth of 10,938 feet
(3,334 meters). In early February 2010 we temporarily suspended drilling
operations in the well following our unsuccessful efforts to retrieve a stuck
pipe. Following the decision to temporarily suspend drilling
operations at the Elijah #3 well, we transferred the rig to the Ma’anit-Rehoboth
#2 well to conduct testing procedures. We intend to resume drilling
activity in the Elijah #3 well at the earliest appropriate time. See
“Risk Factors” beginning on page 10.
We
have finalized the location of our next drilling location (following Elijah #3
well) and plan to drill the Ma'anit-Joseph #3 well at a site approximately one
kilometer to the south of the Ma'anit-Rehoboth #2 well. The drilling of the
Ma'anit-Joseph #3 well is planned to test the Permian geological formation. We
have started the permitting process and are in discussions with the owners of
suitable drilling rigs.
We hold
100% of the working interest in our licenses and our permit, which means we are
responsible for 100% of the costs of exploration and, if established,
production. Our net revenue interest is 81.5%, which means we would receive
81.5% of the gross proceeds from the sale of oil and gas from license areas upon
their conversion to production leases, if there is any commercial production.
The 18.5% to which we are not entitled comprises (i) a 12.5% royalty reserved by
the State of Israel and (ii) a overriding royalty interest (or equivalent net
operating profits interest) of 6% of gross revenue from production given over to
two charitable foundations. No royalty would be payable to any landowner with
respect to production from our license areas as the State of Israel owns all the
mineral rights. In addition, we may establish a key employee incentive plan that
may receive an overriding royalty interest (or equivalent net operating profits
interest) of up to 1.5%. In that event, our effective net
revenue interest would be 80%.
Our
ability to generate future revenues and operating cash flow will depend on the
successful exploration and exploitation of our current and any future petroleum
rights or the acquisition of oil and/or gas producing properties, the volume and
timing of our production, as well as commodity prices for oil and gas. Such
pricing factors are largely beyond our control, and may result in fluctuations
in our earnings.
Our
company’s vision, as exemplified by its Founder and Chairman, John Brown, of
finding oil and/or natural gas in Israel, is biblically inspired. The vision is
based, in part, on biblical references alluding to the presence of oil and/or
natural gas in territories within the State of Israel that were formerly within
certain ancient biblical tribal areas. While John Brown provides the broad
vision and goals for Zion, the actions taken by the Zion management as it
actively explores for oil and gas in Israel are based on modern science and good
business practice. Zion’s oil and gas exploration activities are supported by
appropriate geological and other science based studies and surveys typically
carried out by companies engaged in oil and gas exploration
activities.
Recent
Financings
Since October 2008, we raised gross
proceeds of approximately $45,000,000 from the public offering of our securities
for use in our operations, including drilling plans. Below is a brief
summary of these offerings.
Between
October 24, 2008 and January 9, 2009, we raised from a follow-on public offering
gross proceeds of $6,663,000 from the sale of units of our securities, of which
$240,000 was for debt conversion. Each unit offered in the follow-on
offering consisted of (i) one share of common stock, par value $.01 per share
and (ii) one warrant to purchase one share of common stock at a per share
exercise price equal to $7.00.
In June
2009, we raised gross proceeds of $21,000,000 from a rights offering to common
stockholders of up to 4.2 million shares of our common stock. The rights
offering commenced on May 4, 2009, following the declaration of the
effectiveness of the registration statement filed with the SEC in respect of
such offering. Under the rights offering, stockholders of record on the record
date of May 4, 2009 of shares of the Company’s common stock received, by way of
a dividend, .375 of a subscription right for each share held as of such date
(three subscription rights for each eight shares). Each whole subscription right
entitled the shareholder to purchase one share of common stock at the purchase
price of $5.00 per share. The rights offering was fully subscribed, resulting in
our distribution of all of the 4.2 million shares available, including 2,126,737
shares under the basic subscription privilege and 2,073,263 under the
over-subscription privilege, representing a 51% basic subscription participation
rate.
In
November 2009, we raised an additional $18,000,000 from a follow-on rights
offering to common stockholders of up to 3.6 million shares of our common stock.
The rights offering commenced on October 19, 2009, following the declaration of
the effectiveness of the registration statement filed with the SEC in respect of
the offering. Under the rights offering, stockholders of record on the record
date of October 19, 2009 of shares of the Company’s common stock received, by
way of a dividend, .23 of a subscription right for each share held as of such
date (twenty three subscription rights for each one hundred shares). Each whole
subscription right entitled the shareholder to purchase one share of common
stock at the purchase price of $5.00 per share. The rights offering was fully
subscribed, resulting in our distribution of all of the 3.6 million shares
available, including 1,671,523 shares under the basic subscription privilege and
1,928,477under the over-subscription privilege, representing a 46% basic
subscription participation rate.
The
Securities We May Offer
We may
offer shares of our common stock, various series of debt securities, warrants to
purchase any of such securities and rights to purchase any of the foregoing
securities, either individually or in units, with a total value of up to
$50,000,000 from time to time under this prospectus at prices and on terms to be
determined by market conditions at the time of offering. This prospectus
provides you with a general description of the securities we may offer.
Each time we offer a type or series of securities, we will provide a prospectus
supplement that will describe the specific amounts, prices and other important
terms of the securities, including, to the extent applicable:
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aggregate principal amount or
aggregate offering price;
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maturity, if
applicable;
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original issue discount, if
any;
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rates and times of payment of
interest, if any;
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redemption, conversion, exchange
or sinking fund terms, if
any;
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conversion or exchange prices or
rates, if any, and, if applicable, any provisions for changes to or
adjustments in the conversion or exchange prices or rates and in the
securities or other property receivable upon conversion or
exchange;
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restrictive covenants, if
any;
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voting or other rights, if any;
and
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important federal income tax
considerations.
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The
prospectus supplement also may add, update or change information contained in
this prospectus or in documents we have incorporated by reference into this
prospectus. However, no prospectus supplement will offer a security that is not
registered and described in this prospectus at the time of the effectiveness of
the registration statement of which this prospectus is a part.
We may
sell the securities directly to or through underwriters, dealers or
agents. We, and our underwriters or agents, reserve the right to accept or
reject all or part of any proposed purchase of securities. If we do offer
securities through underwriters or agents, we will include in the applicable
prospectus supplement:
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the names of those underwriters
or agents;
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applicable fees, discounts and
commissions to be paid to
them;
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details regarding over-allotment
options, if any; and
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the net proceeds to
us.
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The
following is a summary of the securities we may offer with this
prospectus.
Common
Stock. We currently have authorized 50,000,000 shares of common
stock, par value $0.01 per share. We may offer shares of our common stock either
alone or underlying other registered securities convertible into or exercisable
for our common stock from time to time. Holders of our common stock are entitled
to one vote per share for the election of directors and on all other matters
that require stockholder approval. In the event of our liquidation,
dissolution or winding up, holders of our common stock are entitled to share
ratably in the assets remaining after payment of liabilities. Currently, we
do not pay any dividends. Our common stock does not carry any preemptive rights
enabling a holder to subscribe for, or receive shares of, any class of our
common stock or any other securities convertible into shares of any class of our
common stock, or any redemption rights.
Debt
Securities. We may offer debt securities from time to time, in one
or more series, as either senior or subordinated debt or as senior or
subordinated convertible debt. The senior debt securities will rank
equally with any other unsubordinated debt that we may have and may be secured
or unsecured. The subordinated debt securities will be subordinate and
junior in right of payment, to the extent and in the manner described in the
instrument governing the debt, to all or some portion of our indebtedness.
Any convertible debt securities that we issue will be convertible into or
exchangeable for our common stock or other securities of ours. Conversion
may be mandatory or at your option and would be at prescribed conversion
rates.
The debt
securities will be issued under one or more documents called indentures, which
are contracts between us and a trustee for the holders of the debt
securities. In this prospectus, we have summarized certain general and
standard features of the debt securities we may issue. We urge you,
however, to read the prospectus supplements related to the series of debt
securities being offered, as well as the complete indentures that contain the
terms of the debt securities. We will file as exhibits to the
registration statement of which this prospectus is a part, or will incorporate
by reference into such registration statement from a Current Report on Form 8-K
that we file with the SEC, the forms of indentures and any supplemental
indentures and the forms of debt securities containing the terms of debt
securities we are offering before the issuance of any series of debt pursuant to
the Registration Statement of which this Prospectus forms a part.
Warrants.
We may offer warrants for the purchase of our common stock, and/or debt
securities in one or more series, from time to time. We may issue warrants
independently or together with common stock, and/or debt securities, and the
warrants may be attached to or separate from those securities.
The
warrants will be evidenced by warrant certificates issued under one or more
warrant agreements, which are contracts between us and an agent for the holders
of the warrants. In this prospectus, we have summarized certain general
and standard features of the warrants. We urge you, however, to read the
prospectus supplements related to the series of warrants being offered, as well
as the warrant agreements and warrant certificates that contain the terms of the
warrants. We will file as exhibits to the registration statement of which
this prospectus is a part, or will incorporate by reference into such
registration statement from a Current Report on Form 8-K that we file with the
SEC, the form of warrant agreements and form of warrant certificates relating to
warrants for the purchase of common stock and debt securities we are offering
before the issuance of any such warrants pursuant to the Registration Statement
of which this Prospectus forms a part.
Units.
We may offer units consisting of common stock, debt securities and/or warrants
to purchase any of such securities in one or more series. In this prospectus, we
have summarized certain general and standard features of the units. We urge you,
however, to read the prospectus supplements related to the series of units being
offered, as well as the unit agreements that contain the terms of the units. We
will file as exhibits to the registration statement of which this prospectus is
a part, or will incorporate by reference from a Current Report on Form 8-K that
we file with the SEC, the form of unit agreement and any supplemental agreements
that describe the terms of the series of units we are offering before the
issuance of the related series of units pursuant to the Registration Statement
of which this Prospectus forms a part.
We will
evidence each series of units by unit certificates that we will issue under a
separate agreement. We will enter into the unit agreements with a unit agent.
Each unit agent will be a bank or trust company that we select. We will indicate
the name and address of the unit agent in the applicable prospectus supplement
relating to a particular series of units.
Rights. We may issue rights to
purchase common stock or debt securities or warrants or any combination of the
above securities of our company. We may issue rights independently or together
with other securities. Rights sold with other securities as a unit may be
attached to or separate from the other securities and may be (but shall not be
required to be) publicly-listed securities. The rights may or may not be
transferable by the persons purchasing or receiving the rights.
Each
series of rights will be issued under a separate rights agent agreement to be
entered into between us and one or more banks, trust companies or other
financial institutions, as rights agent, that we will name in the applicable
prospectus supplement. In this prospectus, we have summarized certain general
and standard features of the rights. We urge you, however, to read the
prospectus supplements related to the rights offering, as well as the relevant
subscription documents. We will file as exhibits to the registration
statement of which this prospectus is a part, or will incorporate by
reference into such registration statement from a Current Report on Form 8-K
that we file with the SEC, the form of subscription agreements and form of
subscription certificates relating to rights for the purchase of common stock,
debt securities and warrants we may then be offering before the issuance of any
such rights or underlying securities pursuant to the Registration Statement of
which this Prospectus forms a part.
THIS
PROSPECTUS MAY NOT BE USED TO OFFER OR SELL ANY SECURITIES UNLESS ACCOMPANIED BY
A PROSPECTUS SUPPLEMENT.
RISK
FACTORS
Before
making an investment decision, you should carefully consider the risks described
under “Risks Related to our Business” below and in the applicable prospectus
supplement, together with all of the other information appearing in this
prospectus or incorporated by reference into this prospectus and any applicable
prospectus supplement, in light of your particular investment objectives and
financial circumstances. Our business, financial condition or results of
operations could be materially adversely affected by any of these risks. The
trading price of our securities could decline due to any of these risk factors,
and you may lose all or any part of your investment.
Risks
Related to our Business
We
are an exploration stage company with no current source of income and,
consequently, our financial condition has been unsound in the past and might
again be so in the future.
We
were incorporated in April 2000 and are still an exploration stage company. Our
operations are subject to all of the risks inherent in exploration stage
companies with no revenues or operating income. Our potential for success must
be considered in light of the problems, expenses, difficulties, complications
and delays frequently encountered in connection with a new business, especially
the oil and gas exploration business. We cannot warrant or provide any assurance
that our business objectives will be accomplished. All of our audited financial
statements since inception have contained a statement by management and by the
auditors that raise substantial doubt about us being able to continue as a
"going concern" unless we are able to raise additional capital.
We
may require additional funds to drill additional wells.
Our
planned work program is expensive. Following the raise of gross proceeds of
$21,000,000 from the rights offering that we completed in June 2009 and the
additional $18,000,000 from the second rights offering we completed in November
2009, we believe that our cash reserves are sufficient to enable us to maintain
our operations as presently conducted through September 2010, including
production testing the Ma’anit-Rehoboth #2 well and drilling our planned
subsequent well, the Ma'anit-Joseph #3 well or the resumption of drilling of the
Elijah #3 well. We have finalized the drilling location for the Ma’anit-Joseph
#3 well and plan to drill it at a site approximately one kilometer to the south
of the Ma'anit-Rehoboth #2 well. To continue our drilling program beyond that
point, we will need to raise additional capital. We may also need to raise
additional capital in order to take advantage of business opportunities that
become available to us. We currently have no commitments for any financing and
no assurance can be provided that we will be able to raise funds when
needed.
In any
event, any additional financing could cause your relative interest in our assets
and potential earnings to be significantly diluted. Even if we have exploration
success, we may not be able to generate sufficient revenues to offset the cost
of dry holes and general and administrative expenses.
A
substantial and extended decline in oil or natural gas prices could adversely
impact our future rate of growth and the carrying value of our unproved oil
& gas assets.
Prices
for oil and natural gas fluctuate widely. Fluctuations in the prices of oil and
natural gas will affect many aspects of our business, including our ability to
attract capital to finance our operations, our cost of capital, and the value of
our unproved oil and natural gas properties. Prices for oil and natural gas may
fluctuate widely in response to relatively minor changes in the supply of and
demand for oil and natural gas, market uncertainty and a wide variety of
additional factors that are beyond our control, such as the domestic and foreign
supply of oil and natural gas, the ability of members of the Organization of
Petroleum Exporting Countries to agree to and maintain oil price and production
controls, technological advances affecting energy consumption, and domestic and
foreign governmental regulations. Significant and extended reductions in
oil and natural gas prices could require us to reduce our capital expenditures
and impair the carrying value of our assets.
If we are
successful in finding commercial quantities of oil and/or gas, our revenues,
operating results, financial condition and ability to borrow funds or obtain
additional capital will depend substantially on prevailing prices for oil and
natural gas. Declines in oil and gas prices may materially adversely affect our
financial condition, liquidity, ability to obtain financing and operating
results. Lower oil and gas prices also may reduce the amount of oil and gas that
we could produce economically.
Historically,
oil and gas prices and markets have been volatile, with prices fluctuating
widely, and they are likely to continue to be volatile, making it impossible to
predict with any certainty the future prices of oil and gas.
Subject
to the completion of our testing procedures, we may incur substantial impairment
write-down with respect to Ma’anit-Rehoboth #2 well and/or the Elijah #3
well.
We
account for our oil and gas property costs using the full-cost method of
accounting for oil and gas properties. Accordingly, all costs associated with
acquisition, exploration and development of oil and gas reserves, including
directly related overhead costs, are capitalized. We record an investment
impairment charge when we believe an investment has experienced a decline in
value that is other than temporary.
We
drilled the Ma’anit-Rehoboth #2 well to a depth of 17,913 feet (5,460
meters). We are currently in the process of production testing the
identified ‘zones of interest’ individually for recoverable
hydrocarbons. We have resumed testing on the Ma’anit-Rehoboth #2 well
in February 2010. We will either complete the well or, in the event we
conclusively determine that the well is incapable of producing oil and/or gas in
commercial quantities, then we will need to abandon the well and write off the
costs accumulated to date.
As of
the end of January 2010, we drilled the Elijah #3 well to a depth of 10,938 feet
(3,334 meters). However, certain drill pipe became stuck in the
well and the well has been temporarily suspended pending further analysis on how
best to proceed.
Abandonment
of properties is accounted for as adjustments to capitalized costs. The net
capitalized costs are subject to a “ceiling test,” which limits such costs to
the aggregate of the estimated present value of future net revenues from proved
reserves discounted at ten percent based on current economic and operating
conditions, plus the lower of cost or fair market value of unproved properties.
The recoverability of amounts capitalized for oil and gas properties is
dependent upon the identification of economically recoverable reserves, together
with obtaining the necessary financing to exploit such reserves and the
achievement of profitable operations.
We review
our unproved oil and gas properties periodically to determine whether they have
been impaired. An impairment allowance is provided on an unproved property when
we determine that the property will not be developed. Any impairment charge
incurred is recorded in accumulated depletion, impairment and amortization to
reduce our recorded basis in the asset.
A
failure to obtain extensions of our exploration licenses would have a material
adverse effect on our business and prospects.
We currently hold two exploration
licenses, the Asher-Menashe License and the Joseph License. The Asher-Menashe
License has a three-year term, which commenced on June 10, 2007 and runs through
June 9, 2010, which may be extended for up to an additional four years as
provided by the Petroleum Law. The Joseph License has a three-year term, which
commenced on October 11, 2007 and runs through October 10, 2010, which may be
extended for an additional four years as provided by the Petroleum Law. We are
currently in the process of obtaining an extension to each of these licenses
from the Israel Petroleum Commissioner. While we anticipate that the extension
will be granted, no assurance can be given that such extension will be
forthcoming. The Israel Petroleum Commissioner’s refusal to extend the license,
or even a delay in their receipt, can have a material adverse effect on our
business and prospects.
We
have no proved reserves or current production and we may never have
any.
We do not
have any proved reserves or current production of oil or gas. We cannot assure
you that any wells will be completed or produce oil or gas in commercially
profitable quantities.
We
have a history of losses and we cannot assure you that we will ever be
profitable.
We
incurred net losses of $4,424,000, $4,018,000 and $13,047,000 for the years
ended December 31, 2009, 2008 and 2007, respectively,. The loss for the year
ended December 31, 2007 included an impairment charge of $9,494,000 to our
unproved oil and gas properties. Our accumulated deficit as of
December 31, 2009 was $28,829,000. We cannot assure that we will ever be
profitable.
Oil
and gas exploration is an inherently risky business.
Exploratory
drilling involves enormous risks, including the risk that no commercially
productive oil or natural gas reservoirs will be discovered. Even when properly
used and interpreted, seismic data analysis and other computer simulation
techniques are only tools used to assist geoscientists in trying to identify
subsurface structures and hydrocarbon indicators. They do not allow the
interpreter to know conclusively if hydrocarbons are present or economically
available. The risk analysis techniques we use in evaluating potential drilling
sites rely on subjective judgments of our personnel and
consultants.
Operating
hazards and uninsured risks with respect to our oil and gas operations may have
material adverse effects on our operations.
Our
exploration and, if successful, development and production operations are
subject to all of the risks normally incident to the exploration for and the
development and production of oil and gas, including blowouts, cratering,
uncontrollable flows of oil, gas or well fluids, fires, pollution and other
environmental and operating risks. These hazards could result in substantial
losses due to injury or loss of life, severe damage to or destruction of
property and equipment, pollution and other environmental damage and suspension
of operations. While as a matter of practice we take out insurance against some
or all of these risks, such insurance may not cover the particular hazard and
may not be sufficient to cover all losses. The occurrence of a significant event
adversely affecting any of the oil and gas properties in which we have an
interest could have a material adverse affect on us, could materially affect our
continued operation and could expose us to material liability.
Political
risks may adversely affect our operations and/or inhibit our ability to raise
capital.
Our
operations are concentrated in Israel and could be directly affected by
political, economic and military conditions in Israel. Efforts to secure a
lasting peace between Israel and its Arab neighbors and Palestinian residents
have been underway since the State of Israel was established in 1948, and the
future of these peace efforts is still uncertain.
Kibbutz
Ma'anit (where we drilled our first well and drilled the Ma’anit-Rehoboth #2) is
in an area adjacent to Israeli Arab towns where anti-Israeli rioting broke out
in late 2000. On December 27, 2008, Israel began a military offensive against
the Hamas terrorist organization infrastructure based in Gaza. (Gaza is in the
south and our license areas are in the north of Israel.) Currently, a
cease-fire is in effect. Any future armed conflict, political
instability or continued violence in the region could have a negative effect on
our operations and business conditions in Israel, as well as our ability to
raise additional capital necessary for completion of our exploration
program.
Economic
risks may adversely affect our operations and/or inhibit our ability to raise
additional capital.
Economically,
our operations in Israel may be subject to:
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exchange rate
fluctuations;
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royalty and tax increases and
other risks arising out of Israeli State sovereignty over the mineral
rights in Israel and its taxing authority ;
and
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changes in Israel's economy that
could cause the legislation of oil and gas price
controls.
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Consequently,
our operations may be substantially affected by local economic factors beyond
our control, any of which could negatively affect our financial performance and
prospects.
Legal
risks could negatively affect the value of our Company.
Legally,
our operations in Israel may be subject to:
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changes in the Petroleum Law
resulting in modification of license and permit
rights;
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adoption of new legislation
relating to the terms and conditions pursuant to which operations in the
energy sector may be
conducted;
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changes in laws and policies
affecting operations of foreign-based companies in Israel;
and
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changes in governmental energy
and environmental policies or the personnel administering
them.
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The Israeli
Ministry of National Infrastructures is considering proposed legislation
relating to licensing requirements for entities engaged in the fuel sector that,
if adopted as currently proposed, may result in our having to obtain additional
licenses to market and sell hydrocarbons that may be discovered by us. We have
been advised by the Ministry that they do not intend to deprive a holder of
petroleum rights under the Petroleum Law of its right under that law to sell
hydrocarbons discovered and produced under its petroleum rights. We cannot now
predict whether or in what form the proposed legislation may be adopted or, if
adopted, its possible impact on our operations.
Further,
in the event of a legal dispute in Israel, we may be subject to the exclusive
jurisdiction of Israeli courts or we may not be successful in subjecting persons
who are not United States residents to the jurisdiction of courts in the United
States, either of which could adversely affect the outcome of a
dispute.
The
Ministry of Environmental Protection is considering proposed legislation
relating to polluted materials, including their production, treatment, handling,
storage and transportation, that may affect land or water
resources. Persons engaged in activities involving these types of
materials will be required to prepare environmental impact statements and
remediation plans either prior to commencing activities or following the
occurrence of an event that may cause pollution to land or water resources or
endanger public health. We do now know and cannot predict whether any
legislation in this area will be enacted and, if so, in what form and which of
its provisions, if any, will relate to and affect our activities, how and to
what extent.
Our
petroleum rights (including licenses and permits) could be canceled, terminated
or not extended, and we would not be able to successfully execute our business
plan.
Any
license or other petroleum right we hold or may be granted is granted for a
fixed period and requires compliance with a work program detailed in the license
or other petroleum right. If we do not fulfill the relevant work program due to
inadequate funding or for any other reason, the Israeli government may terminate
the license or any other petroleum right before its scheduled expiration
date. No assurance can be provided that we will be able to obtain an
extension to this if in fact we are unable to begin drilling by such
date.
There are limitations on the transfer of
interests in our petroleum rights, which could impair our ability to raise
additional funds to execute our business plan.
The
Israeli government has the right to approve any transfer of rights and interests
in any license or other petroleum right we hold or may be granted and any
mortgage of any license or other petroleum rights to borrow money. If we attempt
to raise additional funds through borrowings or joint ventures with other
companies and are unable to obtain required approvals from the government, the
value of your investment could be significantly diluted or even
lost.
Our dependence on the limited number
of contractors, equipment and professional services available in Israel may
result in increased costs and possibly material delays in our work
schedule.
Due to the lack of competitive
resources in Israel, costs for our operations may be more expensive than costs
for similar operations in other parts of the world. We are also more likely to
incur delays in our drilling schedule and be subject to a greater risk of
failure in meeting our required work schedule. Similarly, some of the oil field
personnel we need to undertake our planned operations are not necessarily
available in Israel or available on short notice for work in Israel. Any or all
of the factors specified above may result in increased costs and delays in the
work schedule.
Our
dependence on Israeli local licenses and permits may require more funds than we
have budgeted and may cause delays in our work schedule.
In
connection with drilling operations, we are subject to a number of Israeli local
licenses and permits. Some of these are issued by the Israeli security forces,
the Civil Aviation Authority, the Israeli Water Commission, the Israel Lands
Authority, the holders of the surface rights in the lands on which we intend to
conduct drilling operations, including Kibbutz Ma'anit, Kibbutz Ein Carmel,
local and regional planning commissions, and environmental
authorities.
The
surface rights to the drill site on which we plan to drill the Ma’anit #3 well
are held under a long-term lease by Kibbutz Ma'anit. The rights are owned by the
State of Israel and administered by the Israel Lands Authority. Permission
necessary to enter and use other drill sites to conduct petroleum operations has
been previously granted to Zion by the Kibbutz in consideration for a monthly
fee of $350. Permission of the Israel Lands Authority for the use of the surface
rights is also required, which permission the Israel Lands Authority is required
to grant under the Petroleum Law. On August 14, 2008, the Authority granted the
required permission for a two-year period (which period may be extended),
subject to our paying a one time surface use fee of approximately $455, signing
a land use agreement and providing a bank guarantee in the amount of NIS 50,000
(approximately $12,500). The use fee has been paid, the agreement signed and the
bank guarantee provided.
The surface rights to the drill site on
which we are drilling the Elijah #3 well are held under a long-term lease by
Kibbutz Ein Carmel. The rights are owned by the State of Israel and administered
by the Israel Lands Authority. Permission necessary to enter and use the drill
site to conduct petroleum operations has been granted to Zion by the Kibbutz in
consideration for a one-time fee of approximately $124,000. Permission of the
Israel Lands Authority for the use of the surface rights is also required, which
permission the Israel Lands Authority is required to grant under the Petroleum
Law. We are currently working with the Authority to finalize their
approval.
In the
event of a commercial discovery and depending on the nature of the discovery and
the production and related distribution equipment necessary to produce and sell
the discovered hydrocarbons, we will be subject to additional licenses and
permits, including from various departments in the Ministry of National
Infrastructures, regional and local planning commissions, the environmental
authorities and the Israel Lands Authority. If we are unable to obtain some or
all of these permits or the time required to obtain them is longer than
anticipated, we may have to alter or delay our planned work schedule, which
would increase our costs.
If we are
successful in finding commercial quantities of oil and/or gas, our operations
will be subject to laws and regulations relating to the generation, storage,
handling, emission, transportation and discharge of materials into the
environment, which can adversely affect the cost, manner or feasibility of our
doing business. Many Israeli laws and regulations require permits for the
operation of various facilities, and these permits are subject to revocation,
modification and renewal. Governmental authorities have the power to enforce
compliance with their regulations, and violations could subject us to fines,
injunctions or both.
If
compliance with environmental regulations is more expensive than anticipated, it
could adversely impact the profitability of our business.
Risks of
substantial costs and liabilities related to environmental compliance issues are
inherent in oil and gas operations. It is possible that other developments, such
as stricter environmental laws and regulations, and claims for damages to
property or persons resulting from oil and gas exploration and production, would
result in substantial costs and liabilities. This could also cause our insurance
premiums to be significantly greater than anticipated.
Earnings
will be diluted due to charitable contributions and key employee incentive
plan.
We are
committed to donating in the form of a royalty interest, 6% of our gross sales
revenues, if any, to two charitable foundations. In addition, we may allocate
1.5% royalty interest or equivalent net operating profits interest to a key
employee incentive plan designed as bonus compensation over and above our
executive compensation payments. This means that the total royalty burden on our
property (including the government royalty of 12.5%) may be up to 20%. As our
expenses increase with respect to the amount of sales, these donations and
allocation could significantly dilute future earnings and, thus, depress the
price of the common stock.
The
exercise of currently outstanding warrants and options may adversely affect the
market price of our common stock
In
connection with our follow on public offering completed in January 2009, we
issued warrants to purchase up to 666,343 shares of our common stock at a per
share exercise price of $7.00, exercisable through January 31, 2012, of which
607,154
remain outstanding as of March 26,
2010. The shares underlying these warrants have been registered and,
accordingly, any shares issued upon the exercise of these warrants will be
immediately resalable on the open market. Additionally, we currently have
employee stock options outstanding to purchase 444,549 shares of common stock at
prices ranging between $0.01 and $8.25 per share.
The exercise or possibility of exercise
of outstanding warrants and employee stock options could have an adverse effect
on the market price for our common stock, and you may experience dilution to
your holdings.
Risks
Related to Our Stock
Our
stock price and trading volume may be volatile, which could result in losses for
our stockholders.
The
equity trading markets have recently experienced high volatility resulting in
highly variable and unpredictable pricing of equity securities. If the turmoil
in the equity trading markets continues, the market for our common stock could
change in ways that may or may not be related to our business, our industry or
our operating performance and financial condition. In addition, the trading
volume in our common stock may fluctuate and cause significant price variations
to occur. Some of the factors that could negatively affect our share price or
result in fluctuations in the price or trading volume of our common stock
include:
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actual or anticipated quarterly
variations in our operating results, including further impairment to
unproved oil and gas
properties,
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changes in expectations as to our
future financial performance or changes in financial estimates, if
any,
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announcements relating to our
business,
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conditions generally affecting
the oil and natural gas
industry,
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the success of our operating
strategy, and
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the operating and stock
performance of other comparable
companies.
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Many
of these factors are beyond our control, and we cannot predict their potential
effects on the price of our common stock. In addition, the stock market is
subject to extreme price and volume fluctuations. During the past fifty-two
weeks, our stock price has fluctuated from an intraday low (on February 5, 2010)
of $4.95 to an intraday high of $17.68 (on February 24, 2009). This
volatility has had a significant effect on the market price of securities issued
by many companies for reasons unrelated to their operating performance and could
have the same effect on our common stock.
No
assurance can be provided that you will be able to resell your shares of common
stock at or above the price you acquired those shares in this offering. We
cannot assure you that the market price of common stock will increase to the per
share price at which the Unit was offered or that the market price of common
stock will not fluctuate or decline significantly.
Future
sales of our common stock may adversely affect the prevailing market price for
our common stock.
We are
authorized to issue up to 50,000,000 shares of common stock, of which there were
18,748,923
shares of our common stock outstanding as of March 26, 2010. An additional
1,557,154 shares of common stock have been reserved for issuance upon the
exercise of outstanding warrants and options previously issued, or available for
issue under the Employee Stock Option Plan (ESOP) including the warrants issued
in connection with our follow-on public offering which terminated on January 9,
2009. The warrants for 607,154 shares of common stock that we issued in the
context of our recently completed follow-on public offering became exercisable
as of February 9, 2009 and, upon any such exercise of these warrants, we will
issue freely tradable shares. As of January 28, 2010, the Company has issued
59,189 shares in respect of these warrant exercises. The exercise of
these warrants and/or the issuance of additional shares of our common stock in
connection with the above would dilute the interest in our company represented
by each share of common stock and may adversely affect the prevailing market
price of our common.
Cash
dividends will not be paid to shareholders for the foreseeable
future.
You
may receive little or no cash or stock dividends on your shares of common stock.
The board of directors has not directed the payment of any dividends, other than
rights offering dividends, and does not anticipate paying dividends on the
shares for the foreseeable future and intends to retain any future earnings to
the extent necessary to develop and expand our business. Payment of cash
dividends, if any, will depend, among other factors, on our earnings, capital
requirements, and the general operating and financial condition, and will be
subject to legal limitations on the payment of dividends out of paid-in
capital.
USE
OF PROCEEDS
Unless
otherwise indicated in the prospectus supplement applicable to an offering, we
intend to use any net proceeds from the sale of our securities to fund our
operations and for other general corporate purposes, such as additions to
working capital and expansion of our drilling efforts. We have not
determined the amount of net proceeds to be used specifically for the foregoing
purposes.
When we
offer a particular series of securities, we will describe the intended use of
the net proceeds from that offering in a prospectus supplement. The actual
amount of net proceeds we spend on a particular use will depend on many factors,
including, our future capital expenditures, the amount of cash required by our
operations, and our future revenue growth, if any. Therefore, we will retain
broad discretion in the use of the net proceeds.
DESCRIPTION
OF COMMON STOCK
Our
authorized share capital consists of 50,000,000 shares of common stock, par
value $0.01 per share. As of March 26,
2010, there were 18,748,923
common shares outstanding. All outstanding shares of common stock
are fully paid and non-assessable.
The
following description of our common stock, together with any additional
information we include in any applicable prospectus supplement, summarizes the
material terms and provisions of our common stock that we may offer under this
prospectus. While the terms we have summarized below will apply generally to any
future common stock that we may offer, we will describe the particular terms of
any class or series of these securities in more detail in the
applicable prospectus supplement. For the complete terms of our common
stock, please refer to our Articles of Incorporation and our bylaws that are
incorporated by reference into the registration statement of which this
prospectus is a part or may be incorporated by reference in this prospectus or
any applicable prospectus supplement. The summary below and that contained in
any applicable prospectus supplement are qualified in their entirety by
reference to our Articles of Incorporation and bylaws.
Common
Stock
Voting. Holders of
shares of common stock are entitled to one vote for each share on all matters to
be voted on by the stockholders. They are not entitled to cumulative voting
rights.
Dividends and Other
Distributions. Holders of our common stock are entitled to share in an
equal amount per share in any dividends declared by our board of directors on
the common stock and paid out of legally available assets.
Distributions on
Dissolution. In the event of our liquidation, dissolution or winding up,
holders of our common stock are entitled to share ratably in the assets
remaining after payment of liabilities.
Other Rights. Our
common stock does not carry any preemptive rights enabling a holder to subscribe
for, or receive shares of, any class of our common stock or any other securities
convertible into shares of any class of our common stock. There are no
conversion or redemption rights or sinking funds provided for our
stockholders.
Certificate
of Incorporation and Bylaws Provisions
The
following summary describes provisions of our certificate of incorporation and
bylaws. They may have the effect of discouraging a tender offer, proxy contest
or other takeover attempt that is opposed by our board of directors. These
provisions include:
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restrictions on the rights of
shareholders to remove
directors;
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limitations against shareholders
calling a Special Meeting of shareholders or acting by unanimous written
consent in lieu of a
meeting;
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requirements for advance notice
of actions proposed by shareholders for consideration at meetings of the
shareholders; and
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restrictions on business
combination transactions with "related
persons."
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Classified
board of directors and removal
Our
certificate of incorporation provides that the board of directors shall be
divided into three classes, designated Class I, Class II and Class III, with the
classes to be as nearly equal in number as possible. The term of office of each
class expires at the third Annual Meeting of Shareholders for the election of
directors following the election of such class (except for the initial classes).
Directors may be removed only for cause and only upon the affirmative vote of
holders of at least 66 2/3% of our voting stock at a Special Meeting of
Shareholders called expressly for that purpose. The classification of directors
could have the effect of making it more difficult for shareholders to change the
composition of the board of directors. At least two Annual Meetings of
Shareholders, instead of one, are generally required to effect a change in a
majority of the board of directors.
The
classification provisions could also have the effect of discouraging a third
party from initiating a proxy contest, making a tender offer or otherwise
attempting to obtain control of our company, even though such an attempt might
be beneficial to us and our shareholders. The classification of the board of
directors could thus increase the likelihood that incumbent directors will
retain their positions. In addition, because the classification provisions may
discourage accumulations of large blocks of stock by purchasers whose objective
is to take control of our company and remove a majority of the board of
directors, the classification of the board of directors could tend to reduce the
likelihood of fluctuations in the market price of the common stock that might
result from accumulations of large blocks. Accordingly, shareholders could be
deprived of opportunities to sell their shares of common stock at a higher
market price than might otherwise be the case.
Shareholder
action by written consent and special meetings
Our
bylaws provide that shareholder action can be taken only at an Annual or Special
Meeting of shareholders and may not be taken by written consent in lieu of a
meeting once our number of shareholders exceeded sixty, which occurred in the
first quarter of 2003. Special Meetings of shareholders can be called only upon
a resolution adopted by the board of directors. Moreover, the business permitted
to be conducted at any Special Meeting of shareholders is limited to the
business brought before the meeting under the Notice of Meeting given by us.
These provisions may have the effect of delaying consideration of a shareholder
proposal until the next Annual Meeting. These provisions would also prevent the
holders of a majority of our voting stock from unilaterally using the written
consent or Special Meeting procedure to take shareholder action.
Advance
notice provisions for shareholder nominations and shareholder
proposals
Our
bylaws establish an advance notice procedure for shareholders to make
nominations of candidates for election as directors or bring other business
before a meeting of shareholders. The shareholder notice procedure provides that
only persons who are nominated by, or at the direction of, the board of
directors, or by a shareholder who has given timely written notice containing
specified information to our secretary prior to the meeting at which directors
are to be elected, will be eligible for election as our directors. The
shareholder notice procedure also provides that at a meeting of the shareholders
only such business may be conducted as has been brought before the meeting by,
or at the direction of, the chairman of the board of directors, or in the
absence of the chairman of the board, the chief executive officer, the
president, or by a shareholder who has given timely written notice containing
specified information to our secretary of such shareholder's intention to bring
such business before such meeting.
Although
our bylaws do not give the board of directors any power to approve or disapprove
shareholder nominations for the election of directors or proposals for action,
they may have the effect of precluding a contest for the election of directors
or the consideration of shareholder proposals if the proper procedures are not
followed, and of discouraging or deterring a third party from conducting a
solicitation of proxies to elect its own slate of directors or to approve its
own proposal, without regard to whether consideration of such nominees or
proposals might be harmful or beneficial to Zion and our
shareholders.
Business
combination provision
Our
certificate of incorporation contains a provision for approval of specified
business combination transactions involving any person, entity or group that
beneficially owns at least 10% of our aggregate voting stock. Such person,
entity or group is sometimes referred to as a "related person". This provision
requires the affirmative vote of the holders of not less than 66 2/3% of our
voting stock to approve specified transactions between a related person and
Zion, including:
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any merger or
consolidation;
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any sale, lease, exchange,
mortgage, pledge, transfer or other disposition of our assets having a
fair market value of more than 10% of our total consolidated assets, or
assets representing more than 10% of our cash flow or earning power, or
10% of stockholders' equity, which is referred to as a "substantial
part";
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any sale, lease, exchange,
mortgage, pledge, transfer or other disposition to or with us of all or a
substantial part of the assets of a related
person;
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any reclassification of
securities, recapitalization, or any other transaction involving us that
would have the effect of increasing the voting power of a related
person;
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the adoption of a plan or
proposal for our liquidation or dissolution proposed by or on behalf of a
related person; and
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the entering into of any
agreement, contract or other arrangement providing for any of the
transactions described
above.
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This
voting requirement will not apply to certain transactions, including any
transaction approved by a majority vote of the directors (called "Disinterested
Directors") who are not affiliated or associated with the related person
described above, provided that there are at least three Disinterested Directors.
This provision could have the effect of delaying or preventing a change in
control of Zion in a transaction or series of transactions.
Liability
of directors and indemnification
Our
certificate of incorporation provides that a director will not be personally
liable to us or our shareholders for breach of fiduciary duty as a director,
except to the extent that such exemption or limitation of liability is not
permitted under Delaware General Corporation Law. Any amendment or repeal of
such provisions may not adversely affect any right or protection of a director
existing under our certificate of incorporation for any act or omission
occurring prior to such amendment or repeal.
Our
certificate of incorporation and bylaws provide that each person who at any time
serves or served as one of our directors or officers, or any person who, while
one of our directors or officers, is or was serving at our request as a director
or officer of another corporation, partnership, joint venture, trust or other
enterprise, is entitled to indemnification and the advancement of expenses from
us, to the fullest extent permitted by applicable Delaware law. However, as
provided under applicable Delaware General Corporation Law, this indemnification
will only be provided if the indemnitee acted in good faith and in a manner he
or she reasonably believed to be in, or not opposed to, the best interests of
our company.
Amendments
Our
certificate of incorporation provides that we reserve the right to amend, alter,
change, or repeal any provision contained in our certificate of incorporation,
and all rights conferred to shareholders are granted subject to such
reservation. The affirmative vote of holders of not less than 80% of our voting
stock, voting together as a single class, is required to alter, amend, adopt any
provision inconsistent with, or to repeal certain specified provisions of our
certificate of incorporation. However, the 80% vote described in the prior
sentence is not required for any alteration, amendment, adoption of inconsistent
provision or repeal of the "business combination" provision discussed under the
"Business combination provision" paragraph above which is recommended to the
shareholders by two-thirds of our Disinterested Directors, and such alteration,
amendment, adoption of inconsistent provision or repeal shall require the vote,
if any, required under the applicable provisions of the Delaware General
Corporation Law, our certificate of incorporation and our bylaws. In addition,
our bylaws provide that shareholders may only adopt, amend or repeal our bylaws
by the affirmative vote of holders of not less than 66-2/3% of our voting stock,
voting together as a single class. Our bylaws may also be amended by the
affirmative vote of two-thirds of our board of directors.
Listing
Symbols on the NASDAQ Global Market
Shares
of our common stock and our common stock purchase warrants have, since September
2, 2009, been trading on the NASDAQ Global Market under the symbols “ZN” and
“ZNWAW”. From January 3, 2007 and through September 1, 2009, shares of our
common stock were traded on the NYSE Amex, under the symbol “ZN” and
from February 9, 2008 through September 1, 2009 our common stock purchase
warrants were traded on NYSE Amex under the symbol “ZN.WS. The last sale price
of our common stock on the NASDAQ Global Market on March 25,
2010 was $6.31.
Transfer
Agent and Registrar
The
transfer agent and registrar for our common stock is Registrar and Transfer
Company, Cranford, New Jersey.
DESCRIPTION
OF DEBT SECURITIES
The
following description, together with the additional information we include in
any applicable prospectus supplements, summarizes the general terms and
provisions of the debt securities that we may offer under this prospectus.
While the terms we have summarized below will generally apply to any future debt
securities we may offer under this prospectus, we will describe the particular
terms of any debt securities that we may offer in more detail in the applicable
prospectus supplement. The terms of any debt securities we offer under a
prospectus supplement may differ from the terms we describe below.
However, no prospectus supplement shall fundamentally change the terms that are
set forth in this prospectus or offer a security that is not registered and
described in this prospectus at the time of its effectiveness. As of the
date of this prospectus, we have no outstanding registered debt
securities.
We may
issue one or more series of notes under indentures, which we will enter into
with the trustee to be named therein. If we issue debt securities, we will
file these documents as exhibits to the registration statement of which this
prospectus is a part, or incorporate them by reference from a Current Report on
Form 8-K that we file with the SEC. We use the term “indentures” to refer
to any and all indentures that we may enter into with respect to debt securities
issued and sold pursuant to this Registration Statement.
The
indentures will be qualified under the Trust Indenture Act of 1939. We use
the term “debenture trustee” to refer to either the senior trustee or the
subordinated trustee, as applicable.
The
following summaries of material provisions of the debt securities are subject
to, and qualified in their entirety by reference to, all the provisions of the
indenture applicable to a particular series of debt securities. We urge
you to read the applicable prospectus supplements related to the debt securities
that we sell under this prospectus, as well as the complete indentures that
contain the terms of the debt securities. Except as we may otherwise
indicate, the terms of the senior and the subordinated indentures are
identical.
General
The
indentures may limit the aggregate principal amount of the debt securities which
we may issue and will provide that we may issue the debt securities from time to
time in one or more series. The indentures may or may not limit the amount of
our other indebtedness or the debt securities which we or our subsidiaries may
issue. The particular terms of each series of debt securities will be described
in a prospectus supplement relating to such series, including any pricing
supplement. The prospectus supplement will set forth:
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the principal amount being
offered, and, if a series, the total amount authorized and the total
amount outstanding;
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any limit on the amount that may
be issued;
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whether or not we will issue the
series of debt securities in global form and, if so, the terms and who the
depositary will be;
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whether and under what
circumstances, if any, we will pay additional amounts on any debt
securities held by a person who is not a United States person for tax
purposes, and whether we can redeem the debt securities if we have to pay
such additional amounts;
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the annual interest rate, which
may be fixed or variable, or the method for determining the rate, the date
interest will begin to accrue, the dates interest will be payable and the
regular record dates for interest payment dates or the method for
determining such dates;
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whether or not the debt
securities will be secured or unsecured, and the terms of any secured
debt;
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the terms of the subordination of
any series of subordinated
debt;
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the place where payments will be
payable;
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restrictions on transfer, sale or
other assignment, if any;
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our right, if any, to defer
payment of interest and the maximum length of any such deferral
period;
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the date, if any, after which,
the conditions upon which, and the price at which we may, at our option,
redeem the series of debt securities pursuant to any optional or
provisional redemption provisions, and any other applicable terms of those
redemption provisions;
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the date, if any, on which, and
the price at which we are obligated, pursuant to any mandatory sinking
fund or analogous fund provisions or otherwise, to redeem, or at the
holder’s option to purchase, the series of debt securities and the
currency or currency unit in which the debt securities are
payable;
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whether the indenture will
restrict our ability and/or the ability of our subsidiaries
to:
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incur additional
indebtedness;
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issue additional
securities;
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pay dividends and make
distributions in respect of our capital
stock;
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place restrictions on our
subsidiaries’ ability to pay dividends, make distributions or transfer
assets;
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make investments or other
restricted payments;
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sell or otherwise dispose of
assets;
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enter into sale-leaseback
transactions;
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engage in transactions with
stockholders and affiliates;
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issue or sell stock of our
subsidiaries; or
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effect a consolidation or
merger;
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whether the indenture will
require us to maintain any interest coverage, fixed charge, cash
flow-based, asset-based or other financial
ratios;
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a discussion of any material or
special United States federal income tax considerations applicable to the
debt securities;
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information describing any
book-entry features;
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provisions for a sinking fund
purchase or other analogous fund, if
any;
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whether the debt securities are
to be offered at a price such that they will be deemed to be offered at an
“original issue discount” as defined in paragraph (a) of Section 1273 of
the Internal Revenue Code;
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the procedures for any auction
and remarketing, if any;
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the denominations in which we
will issue the series of debt securities, if other than denominations of
$1,000 and any integral multiple
thereof;
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if other than dollars, the
currency in which the series of debt securities will be denominated;
and
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any other specific terms,
preferences, rights or limitations of, or restrictions on, the debt
securities, including any events of default that are in addition to those
described in this prospectus or any covenants provided with respect to the
debt securities that are in addition to those described above, and any
terms which may be required by us or advisable under applicable laws or
regulations or advisable in connection with the marketing of the debt
securities.
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Conversion
or Exchange Rights
We will
set forth in the prospectus supplement the terms on which a series of debt
securities may be convertible into or exchangeable for common stock or other
securities of ours or a third party, including the conversion or exchange rate,
as applicable, or how it will be calculated, and the applicable conversion or
exchange period. We will include provisions as to whether conversion or
exchange is mandatory, at the option of the holder or at our option. We
may include provisions pursuant to which the number of our securities or the
securities of a third party that the holders of the series of debt securities
receive upon conversion or exchange would, under the circumstances
described in those provisions, be subject to adjustment, or pursuant to which
those holders would, under those circumstances, receive other property upon
conversion or exchange, for example in the event of our merger or consolidation
with another entity.
Consolidation,
Merger or Sale
The
description of the debt securities in the prospectus supplement or the
indentures may provide that we may not consolidate or amalgamate with or merge
into any person or convey, transfer or lease our properties or assets as an
entirety or substantially as an entirety to any person, and we may not permit
any person to consolidate or amalgamate with or merge into us, or convey,
transfer or lease its properties and assets as an entirety or substantially
as an entirety to us, unless:
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immediately after giving effect
to the transaction, no event of default, and no event which after notice
or lapse of time or both would become an event of default, will have
occurred and be continuing;
and
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certain other conditions are
met.
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If the
debt securities are convertible for our other securities, the person with whom
we consolidate or merge or to whom we sell all of our property must make
provisions for the conversion of the debt securities into securities that the
holders of the debt securities would have received if they had converted the
debt securities before the consolidation, merger or sale.
Events
of Default Under the Indenture
Each of
the following constitute reasonably standard events of default that may be
included in any finalized indenture or prospectus supplement as constituting an
event of default with respect to any series of debt securities that we may
issue:
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if we fail to pay interest when
due and payable and our failure continues for 30 days and the time for
payment has not been extended or
deferred;
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if we fail to pay the principal,
sinking fund payment or premium, if any, when due and payable and the time
for payment has not been extended or
delayed;
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if we fail to observe or perform
any other covenant contained in the debt securities or the indentures,
other than a covenant specifically relating to another series of debt
securities, and our failure continues for 90 days after we receive notice
from the debenture trustee or holders of at least 25% in aggregate
principal amount of the outstanding debt securities of the applicable
series;
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if specified events of
bankruptcy, insolvency or reorganization occur;
and
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any other event of default
provided in or pursuant to the applicable indenture or prospectus
supplement with respect to the debt securities of that
series.
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If an
event of default with respect to debt securities of any series occurs and is
continuing, other than an event of default in the event of bankruptcy,
insolvency or reorganization, the debenture trustee or the holders of at least
25% in aggregate principal amount of the outstanding debt securities of that
series, by notice to us in writing, and to the debenture trustee if notice is
given by such holders, may declare the unpaid principal of, premium, if any, and
accrued interest, if any, due and payable immediately. If an event of
default due to bankruptcy, insolvency or reorganization occurs with respect to
us, the principal amount of and accrued interest, if any, of each issue of debt
securities then outstanding shall be due and payable without any notice or other
action on the part of the debenture trustee or any holder.
The
holders of a majority in principal amount of the outstanding debt securities of
an affected series may waive any default or event of default with respect to the
series and its consequences, except defaults or events of default regarding
payment of principal, premium, if any, or interest, unless we have cured the
default or event of default in accordance with the indenture.
Subject
to the terms of the indentures, if an event of default under an indenture shall
occur and be continuing, the debenture trustee will be under no obligation to
exercise any of its rights or powers under such indenture at the request or
direction of any of the holders of the applicable series of debt securities,
unless such holders have offered the debenture trustee reasonable
indemnity. The holders of a majority in principal amount of the
outstanding debt securities of any series will have the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the debenture trustee, or exercising any trust or power conferred on the
debenture trustee, with respect to the debt securities of that series, provided
that:
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the direction so given by the
holder is not in conflict with any law or the applicable indenture;
and
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subject to its duties under the
Trust Indenture Act of 1939, the debenture trustee need not take any
action that might involve it in personal liability or might be unduly
prejudicial to the holders not involved in the
proceeding.
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A holder
of the debt securities of any series will only have the right to institute a
proceeding under the indentures or to appoint a receiver or trustee, or to seek
other remedies if:
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the holder has given written
notice to the debenture trustee of a continuing event of default with
respect to that series;
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the holders of at least 25% in
aggregate principal amount of the outstanding debt securities of that
series have made written request, and such holders have offered reasonable
indemnity to the debenture trustee to institute the proceeding as trustee;
and
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the debenture trustee does not
institute the proceeding, and does not receive from the holders of a
majority in aggregate principal amount of the outstanding debt securities
of that series other conflicting directions within 90 days after the
notice, request and offer.
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These
limitations do not apply to a suit instituted by a holder of debt securities if
we default in the payment of the principal, premium, if any, or interest on, the
debt securities.
We will
periodically file statements with the debenture trustee regarding our compliance
with specified covenants in the indentures.
Modification
of Indenture; Waiver
We and
the debenture trustee may change an indenture without the consent of any holders
with respect to specific matters, including:
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to fix any ambiguity, defect or
inconsistency in the
indenture;
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to comply with the provisions
described above under “Consolidation, Merger or
Sale”;
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to comply with any requirements
of the SEC in connection with the qualification of any indenture under the
Trust Indenture Act of 1939;
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to evidence and provide for the
acceptance of appointment by a successor
trustee;
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to provide for uncertificated
debt securities and to make all appropriate changes for such
purpose;
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to add to, delete from, or revise
the conditions, limitations and restrictions on the authorized amount,
terms or purposes of issuance, authorization and delivery of debt
securities or any series, as set forth in the
indenture;
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to provide for the issuance of
and establish the form and terms and conditions of the debt securities of
any series as provided under “General,” to establish the form of any
certifications required to be furnished pursuant to the terms of the
indenture or any series of debt securities, or to add to the rights of the
holders of any series of debt
securities;
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to add to our covenants such new
covenants, restrictions, conditions or provisions for the protection of
the holders, to make the occurrence, or the occurrence and the
continuance, of a default in any such additional covenants, restrictions,
conditions or provisions an event of default, or to surrender any of our
rights or powers under the indenture;
or
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to change anything that does not
materially adversely affect the interests of any holder of debt securities
of any series.
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In
addition, under the indentures, the rights of holders of a series of debt
securities may be changed by us and the debenture trustee with the written
consent of the holders of at least a majority in aggregate principal amount of
the outstanding debt securities of each series that is affected. However,
we and the debenture trustee may only make the following changes with the
consent of each holder of any outstanding debt securities affected:
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extending the fixed maturity of
the series of debt
securities;
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reducing the principal amount,
reducing the rate of or extending the time of payment of interest, or
reducing any premium payable upon the redemption of any debt securities;
or
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reducing the percentage of debt
securities, the holders of which are required to consent to any amendment,
supplement, modification or
waiver.
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Discharge
Each
indenture will provide that we can elect to be discharged from our obligations
with respect to one or more series of debt securities, except for obligations
to:
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register the transfer or exchange
of debt securities of the
series;
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replace stolen, lost or mutilated
debt securities of the
series;
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maintain paying
agencies;
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hold monies for payment in
trust;
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recover excess money held by the
debenture trustee;
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compensate and indemnify the
debenture trustee; and
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appoint any successor
trustee.
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In order
to exercise our rights to be discharged, we must deposit with the debenture
trustee money or government obligations sufficient to pay all the principal of,
any premium, if any, and interest on, the debt securities of the series on the
dates payments are due.
Form,
Exchange and Transfer
We will
issue the debt securities of each series only in fully registered form without
coupons and, unless we otherwise specify in the applicable prospectus
supplement, in denominations of $1,000 and any integral multiple thereof.
The indenture will provide that we may issue debt securities of a series in
temporary or permanent global form and as book-entry securities that will be
deposited with, or on behalf of, The Depository Trust Company, New York, New
York, known as DTC, or another depositary named by us and identified in a
prospectus supplement with respect to that series. See “Legal Ownership of
Securities” for a further description of the terms relating to any book-entry
securities.
At the
option of the holder, subject to the terms of the indentures and the limitations
applicable to global securities described in the applicable prospectus
supplement, the holder of the debt securities of any series can exchange the
debt securities for other debt securities of the same series, in any authorized
denomination and of like tenor and aggregate principal amount.
Subject
to the terms of the indentures and the limitations applicable to global
securities set forth in the applicable prospectus supplement, holders of the
debt securities may present the debt securities for exchange or for registration
of transfer, duly endorsed or with the form of transfer endorsed thereon duly
executed if so required by us or the security registrar, at the office of the
security registrar or at the office of any transfer agent designated by us for
this purpose. Unless otherwise provided in the debt securities that the
holder presents for transfer or exchange, we will make no service charge for any
registration of transfer or exchange, but we may require payment of any taxes or
other governmental charges.
We will
name in the applicable prospectus supplement the security registrar, and any
transfer agent in addition to the security registrar, that we initially
designate for any debt securities. We may at any time designate additional
transfer agents or rescind the designation of any transfer agent or approve a
change in the office through which any transfer agent acts, except that we will
be required to maintain a transfer agent in each place of payment for the debt
securities of each series.
If we
elect to redeem the debt securities of any series, we will not be required
to:
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issue, register the transfer of,
or exchange any debt securities of any series being redeemed in part
during a period beginning at the opening of business 15 days before the
day of mailing of a notice of redemption of any debt securities that may
be selected for redemption and ending at the close of business on the day
of the mailing; or
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register the transfer of or
exchange any debt securities so selected for redemption, in whole or in
part, except the unredeemed portion of any debt securities we are
redeeming in part.
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Information
Concerning the Debenture Trustee
The
debenture trustee, other than during the occurrence and continuance of an event
of default under an indenture, will undertake to perform only those duties as
are specifically set forth in the applicable indenture. Upon an event of
default under an indenture, the debenture trustee must use the same degree of
care as a prudent person would exercise or use in the conduct of his or her own
affairs. Subject to this provision, the debenture trustee is under no
obligation to exercise any of the powers given it by the indentures at the
request of any holder of debt securities unless it is offered reasonable
security and indemnity against the costs, expenses and liabilities that it might
incur.
Payment
and Paying Agents
Unless we
otherwise indicate in the applicable prospectus supplement, we will make payment
of the interest on any debt securities on any interest payment date to the
person in whose name the debt securities, or one or more predecessor securities,
are registered at the close of business on the regular record date for the
interest.
We will
pay principal of and any premium and interest on the debt securities of a
particular series at the office of the paying agents designated by us, except
that, unless we otherwise indicate in the applicable prospectus supplement, we
may make interest payments by check which we will mail to the holder or by wire
transfer to certain holders. Unless we otherwise indicate in a prospectus
supplement, we will designate the corporate office of the debenture trustee in
the City of New York as our sole paying agent for payments with respect to debt
securities of each series. We will name in the applicable prospectus
supplement any other paying agents that we initially designate for the debt
securities of a particular series. We will maintain a paying agent in each
place of payment for the debt securities of a particular series.
All money
we pay to a paying agent or the debenture trustee for the payment of the
principal of or any premium or interest on any debt securities which remains
unclaimed at the end of two years after such principal, premium or interest has
become due and payable will be repaid to us, and the holder of the debt security
thereafter may look only to us for payment thereof.
Subordination
of Subordinated Debt Securities
The
subordinated debt securities will be subordinate and junior in priority of
payment to certain of our other indebtedness to the extent described in a
prospectus supplement. The indentures will not limit the amount of
indebtedness which we may incur, including senior indebtedness or subordinated
indebtedness, and will not limit us from issuing any other debt, including
secured debt or unsecured debt.
DESCRIPTION
OF WARRANTS
The
following description, together with the additional information we may include
in any applicable prospectus supplements, summarizes the material terms and
provisions of the warrants that we may offer under this prospectus. While the
terms we have summarized below will apply generally to any warrants that we may
offer under this prospectus, we will describe the particular terms of any series
of warrants in more detail in the applicable prospectus supplement. The terms of
any warrants offered under a prospectus supplement may differ from the
terms described below. However, no prospectus supplement will fundamentally
change the terms that are set forth in this prospectus or offer a security that
is not registered and described in this prospectus at the time of its
effectiveness.
We will
file as exhibits to the registration statement of which this prospectus is a
part, or will incorporate by reference from a Current Report on Form 8-K that we
file with the SEC, the form of warrant agreement, including a form of warrant
certificate, that describes the terms of the particular series of warrants we
are offering before the issuance of the related series of warrants. The
following summaries of material provisions of the warrants and the warrant
agreements are subject to, and qualified in their entirety by reference to, all
the provisions of the warrant agreement and warrant certificate applicable to a
particular series of warrants. We urge you to read the applicable prospectus
supplements related to the particular series of warrants that we sell under this
prospectus, as well as the complete warrant agreements and warrant certificates
that contain the terms of the warrants.
General
We will
describe in the applicable prospectus supplement the terms relating to a series
of warrants, including:
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the offering price and aggregate
number of warrants offered;
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the currency for which the
warrants may be purchased;
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if applicable, the designation
and terms of the securities with which the warrants are issued and the
number of warrants issued with each such security or each principal amount
of such security;
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if applicable, the date on and
after which the warrants and the related securities will be separately
transferable;
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in the case of warrants to
purchase debt securities, the principal amount of debt securities
purchasable upon exercise of one warrant and the price at which, and
currency in which, this principal amount of debt securities may be
purchased upon such
exercise;
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in the case of warrants to
purchase common stock, the number of shares of common stock may be,
purchasable upon the exercise of one warrant and the price at which these
shares may be purchased upon such
exercise;
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the effect of any merger,
consolidation, sale or other disposition of our business on the warrant
agreements and the warrants;
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the terms of any rights to redeem
or call the warrants;
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any provisions for changes to or
adjustments in the exercise price or number of securities issuable upon
exercise of the warrants;
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the dates on which the right to
exercise the warrants will commence and
expire;
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the manner in which the warrant
agreements and warrants may be
modified;
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federal income tax consequences
of holding or exercising the
warrants;
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the terms of the securities
issuable upon exercise of the warrants;
and
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any other specific terms,
preferences, rights or limitations of or restrictions on the
warrants.
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Before
exercising their warrants, holders of warrants will not have any of the rights
of holders of the securities purchasable upon such exercise,
including:
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in the case of warrants to
purchase debt securities, the right to receive payments of principal of,
or premium, if any, or interest on, the debt securities purchasable upon
exercise or to enforce covenants in the applicable indenture;
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Exercise
of Warrants
Each
warrant will entitle the holder to purchase the securities that we specify in
the applicable prospectus supplement at the exercise price that we describe in
the applicable prospectus supplement. Unless we otherwise specify in the
applicable prospectus supplement, holders of the warrants may exercise the
warrants at any time up to the specified time on the expiration date that we set
forth in the applicable prospectus supplement. After the close of business on
the expiration date, unexercised warrants will become void.
Holders
of the warrants may exercise the warrants by delivering the warrant certificate
representing the warrants to be exercised together with specified information,
and paying the required amount to the warrant agent in immediately available
funds, as provided in the applicable prospectus supplement. We will set forth on
the reverse side of the warrant certificate and in the applicable prospectus
supplement the information that the holder of the warrant will be required to
deliver to the warrant agent.
Upon
receipt of the required payment and the warrant certificate properly completed
and duly executed at the corporate trust office of the warrant agent or any
other office indicated in the applicable prospectus supplement, we will issue
and deliver the securities purchasable upon such exercise. If fewer than all of
the warrants represented by the warrant certificate are exercised, then we will
issue a new warrant certificate for the remaining amount of warrants. If we so
indicate in the applicable prospectus supplement, holders of the warrants may
surrender securities as all or part of the exercise price for
warrants.
Enforceability
of Rights by Holders of Warrants
Each
warrant agent will act solely as our agent under the applicable warrant
agreement and will not assume any obligation or relationship of agency or trust
with any holder of any warrant. A single bank or trust company may act as
warrant agent for more than one issue of warrants. A warrant agent will
have no duty or responsibility in case of any default by us under the applicable
warrant agreement or warrant, including any duty or responsibility to initiate
any proceedings at law or otherwise, or to make any demand upon us. Any
holder of a warrant may, without the consent of the related warrant agent or the
holder of any other warrant, enforce by appropriate legal action its right to
exercise, and receive the securities purchasable upon exercise of, its
warrants.
DESCRIPTION
OF UNITS
The
following description, together with the additional information we may include
in any applicable prospectus supplements, summarizes the material terms and
provisions of the units that we may offer under this prospectus. While the terms
we have summarized below will apply generally to any units that we may offer
under this prospectus, we will describe the particular terms of any series of
units in more detail in the applicable prospectus supplement. The terms of any
units offered under a prospectus supplement may differ from the terms described
below. However, no prospectus supplement will fundamentally change the terms
that are set forth in this prospectus or offer a security that is not registered
and described in this prospectus at the time of its effectiveness.
We will
file as exhibits to the registration statement of which this prospectus is a
part, or will incorporate by reference from a Current Report on Form 8-K that we
file with the SEC, the form of unit agreement that describes the terms of the
series of units we are offering, and any supplemental agreements, before the
issuance of the related series of units. The following summaries of material
terms and provisions of the units are subject to, and qualified in their
entirety by reference to, all the provisions of the unit agreement and any
supplemental agreements applicable to a particular series of units. We urge you
to read the applicable prospectus supplements related to the particular series
of units that we sell under this prospectus, as well as the complete unit
agreement and any supplemental agreements that contain the terms of the
units.
General
We may
issue units comprised of one or more debt securities, shares of common stock and
warrants in any combination. Each unit will be issued so that the
holder of the unit is also the holder of each security included in the unit.
Thus, the holder of a unit will have the rights and obligations of a holder of
each included security. The unit agreement under which a unit is issued may
provide that the securities included in the unit may not be held or transferred
separately, at any time or at any time before a specified date.
We will
describe in the applicable prospectus supplement the terms of the series of
units, including:
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the designation and terms of the
units and of the securities comprising the units, including whether and
under what circumstances those securities may be held or transferred
separately;
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any provisions of the governing
unit agreement that differ from those described below;
and
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any provisions for the issuance,
payment, settlement, transfer or exchange of the units or of the
securities comprising the
units.
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The
provisions described in this section, as well as those described under
“Description of Capital Stock,” “Description of Debt Securities” and
“Description of Warrants” will apply to each unit and to any common stock, debt
security or warrant included in each unit, respectively.
Issuance
in Series
We may
issue units in such amounts and in numerous distinct series as we
determine.
Enforceability
of Rights by Holders of Units
Each unit
agent will act solely as our agent under the applicable unit agreement and will
not assume any obligation or relationship of agency or trust with any holder of
any unit. A single bank or trust company may act as unit agent for more than one
series of units. A unit agent will have no duty or responsibility in case of any
default by us under the applicable unit agreement or unit, including any duty or
responsibility to initiate any proceedings at law or otherwise, or to make any
demand upon us. Any holder of a unit may, without the consent of the related
unit agent or the holder of any other unit, enforce by appropriate legal action
its rights as holder under any security included in the unit.
Title
We, the
unit agents and any of their agents may treat the registered holder of any unit
certificate as an absolute owner of the units evidenced by that certificate for
any purpose and as the person entitled to exercise the rights attaching to the
units so requested, despite any notice to the contrary. See “Legal Ownership of
Securities.”
DESCRIPTION OF
RIGHTS
The
following description, together with the additional information we may include
in any applicable prospectus supplements, summarizes the material terms and
provisions of the rights we may issue from time to time. While the terms we have
summarized below will apply generally to any rights that we may offer under this
prospectus, we will describe the particular terms of any rights offering in more
detail in the applicable prospectus supplement. The terms of any rights offering
under a prospectus supplement may differ from the terms described below.
However, no prospectus supplement will fundamentally change the terms that are
set forth in this prospectus or offer a security that is not registered and
described in this prospectus at the time of its
effectiveness.
We
will file as exhibits to the registration statement of which this prospectus is
a part, or will incorporate by reference from a Current Report on Form 8-K that
we file with the SEC, the form of subscription rights agreement, including a
form of rights certificate, that describes the terms of the particular rights we
are offering before the issuance of securities. The following summaries of
material provisions of the rights and the subscription agreements are subject
to, and qualified in their entirety by reference to, all the provisions of the
subscription agreement and subscription certificates applicable to a particular
rights offering. We urge you to read the applicable prospectus supplements
related to the securities that we sell under this prospectus, as well as the
complete subscription agreements and subscription certificates that contain the
terms of the subscription rights.
General
We may
issue rights to purchase one or more of our securities. Rights may be issued
independently or together with other securities and may or may not be
transferable by the person purchasing or receiving the rights. In connection
with any rights offering to our stockholders, we may enter into a standby
underwriting, backstop or other arrangement with one or more underwriters or
other persons pursuant to which such underwriters or other persons would
purchase any offered securities remaining unsubscribed for after such rights
offering. In connection with a rights offering to our stockholders, we would
distribute certificates evidencing the rights and a prospectus supplement to our
stockholders on or about the record date that we set for receiving rights in
such rights offering.
The
applicable prospectus supplement will describe the following terms of any rights
we may issue, including the following:
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the
title and aggregate number of the
rights;
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the
subscription price or a formula for the determination of the subscription
price for the rights and the currency or currencies in which the
subscription price may be
payable;
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if
applicable, the designation and terms of the securities with which the
rights are issued and the number of rights issued with each such security
or each principal amount of such
security;
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the
number or a formula for the determination of the number of the rights
issued to each stockholder;
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the
extent to which the rights are
transferable;
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in
the case of rights to purchase debt securities, the principal amount of
debt securities purchasable upon exercise of one
right;
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in
the case of rights to purchase common stock, the number of shares of
common stock purchasable upon exercise of one
right;
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the
date on which the right to exercise the rights will commence, and the date
on which the rights will expire (subject to any
extension);
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if
applicable, the minimum or maximum amount of the rights that may be
exercised at any one time;
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the
extent to which such rights include an over-subscription privilege with
respect to unsubscribed
securities;
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if
applicable, the procedures for adjusting the subscription price and number
of shares of common stock purchasable upon the exercise of each right upon
the occurrence of certain events, including stock splits, reverse stock
splits, combinations, subdivisions or reclassifications of common stock or
preferred stock;
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the
effect of any merger, consolidation, sale or other disposition of our
business on the rights;
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the
terms of any rights to redeem or call the
rights;
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information
with respect to book-entry procedures, if
any;
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the
terms of the securities issuable upon exercise of the
rights;
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if
applicable, the material terms of any standby underwriting, backstop or
other purchase arrangement that we may enter into in connection with the
rights offering;
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if
applicable, a discussion of certain U.S. Federal income tax
considerations; and
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any
other terms of the rights, including terms, procedures and limitations
relating to the exchange and exercise of the
rights.
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Exercise
of Rights
Each
right will entitle the holder to purchase for cash or other consideration such
shares of stock or principal amount of securities at the subscription price as
shall in each case be set forth in, or be determinable as set forth in, the
prospectus supplement relating to the rights offered thereby. Rights may be
exercised as set forth in the prospectus supplement beginning on the date
specified therein and continuing until the close of business on the expiration
date set forth in the prospectus supplement relating to the rights offered
thereby. After the close of business on the expiration date, unexercised rights
will become void.
Upon
receipt of payment and a subscription certificate properly completed and duly
executed at the corporate trust office of the subscription agent or any other
office indicated in the prospectus supplement, we will, as soon as practicable,
forward the securities purchasable upon such exercise. If less than all of the
rights represented by such subscription certificate are exercised, a new
subscription certificate will be issued for the remaining rights. If we so
indicate in the applicable prospectus supplement, holders of the rights may
surrender securities as all or part of the exercise price for
rights.
We may
determine to offer any unsubscribed offered securities directly to stockholders,
persons other than stockholders, to or through agents, underwriters or dealers
or through a combination of such methods, including pursuant to standby
underwriting, backstop or other arrangements, as set forth in the applicable
prospectus supplement.
Prior
to exercising their rights, holders of rights will not have any of the rights of
holders of the securities purchasable upon subscription, including, in the case
of rights to purchase common stock or preferred stock, the right to receive
dividends, if any, or payments upon our liquidation, dissolution or winding up
or to exercise any voting rights or, in the case of rights to purchase debt
securities, the right to receive principal, premium, if any, or interest
payments, on the debt securities purchasable upon exercise or to enforce
covenants in the applicable indenture.
LEGAL
OWNERSHIP OF SECURITIES
We can
issue securities in registered form or in the form of one or more global
securities. We describe global securities in greater detail below.
We refer to those persons who have securities registered in their own names on
the books that we or any applicable trustee or depositary or warrant agent
maintain for this purpose as the “holders” of those securities. These
persons are the legal holders of the securities. We refer to those persons
who, indirectly through others, own beneficial interests in securities that are
not registered in their own names, as “indirect holders” of those
securities. As we discuss below, indirect holders are not legal holders,
and investors in securities issued in book-entry form or in street name will be
indirect holders.
Book-Entry
Holders
We may
issue securities in book-entry form only, as we will specify in the applicable
prospectus supplement. This means securities may be represented by one or
more global securities registered in the name of a financial institution that
holds them as depositary on behalf of other financial institutions that
participate in the depositary’s book-entry system. These participating
institutions, which are referred to as participants, in turn, hold
beneficial interests in the securities on behalf of themselves or their
customers.
Only the
person in whose name a security is registered is recognized as the holder of
that security. Global securities will be registered in the name of the
depositary. Consequently, for global securities, we will recognize only
the depositary as the holder of the securities, and we will make all payments on
the securities to the depositary. The depositary passes along the payments
it receives to its participants, which in turn pass the payments along to their
customers who are the beneficial owners. The depositary and its
participants do so under agreements they have made with one another or with
their customers; they are not obligated to do so under the terms of the
securities.
As a
result, investors in a global security will not own securities directly.
Instead, they will own beneficial interests in a global security, through a
bank, broker or other financial institution that participates in the
depositary’s book-entry system or holds an interest through a participant.
As long as the securities are issued in global form, investors will be indirect
holders, and not holders, of the securities.
Street
Name Holders
We may
terminate global securities or issue securities that are not issued in global
form. In these cases, investors may choose to hold their securities in
their own names or in “street name.” Securities held by an investor in street
name would be registered in the name of a bank, broker or other financial
institution that the investor chooses, and the investor would hold only a
beneficial interest in those securities through an account he or she maintains
at that institution.
For
securities held in street name, we or any applicable trustee or depositary will
recognize only the intermediary banks, brokers and other financial institutions
in whose names the securities are registered as the holders of those securities,
and we or any such trustee or depositary will make all payments on those
securities to them. These institutions pass along the payments they
receive to their customers who are the beneficial owners, but only because they
agree to do so in their customer agreements or because they are legally required
to do so. Investors who hold securities in street name will be indirect
holders, not holders, of those securities.
Legal
Holders
Our
obligations, as well as the obligations of any applicable trustee or third party
employed by us or a trustee, run only to the legal holders of the
securities. We do not have obligations to investors who hold beneficial
interests in global securities, in street name or by any other indirect
means. This will be the case whether an investor chooses to be an indirect
holder of a security or has no choice because we are issuing the securities only
in global form.
For
example, once we make a payment or give a notice to the holder, we have no
further responsibility for the payment or notice even if that holder is
required, under agreements with its participants or customers or by law, to pass
it along to the indirect holders but does not do so. Similarly, we may
want to obtain the approval of the holders to amend an indenture, to relieve us
of the consequences of a default or of our obligation to comply with a
particular provision of an indenture, or for other purposes. In such an
event, we would seek approval only from the holders, and not the indirect
holders, of the securities. Whether and how the holders contact the
indirect holders is up to the holders.
Special
Considerations for Indirect Holders
If you
hold securities through a bank, broker or other financial institution, either in
book-entry form because the securities are represented by one or more global
securities or in street name, you should check with your own institution to find
out:
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how
it handles securities payments and
notices;
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whether
it imposes fees or charges;
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how
it would handle a request for the holders’ consent, if ever
required;
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whether
and how you can instruct it to send you securities registered in your own
name so you can be a holder, if that is permitted in the
future;
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how
it would exercise rights under the securities if there were a default or
other event triggering the need for holders to act to protect their
interests; and
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if
the securities are in book-entry form, how the depositary’s rules and
procedures will affect these
matters.
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Global
Securities
A global
security is a security that represents one or any other number of individual
securities held by a depositary. Generally, all securities represented by
the same global securities will have the same terms.
Each
security issued in book-entry form will be represented by a global security that
we issue to, deposit with and register in the name of a financial institution or
its nominee that we select. The financial institution that we select for
this purpose is called the depositary. Unless we specify otherwise in the
applicable prospectus supplement, The Depository Trust Company, New York, New
York, known as DTC, will be the depositary for all securities issued in
book-entry form.
A global
security may not be transferred to or registered in the name of anyone other
than the depositary, its nominee or a successor depositary, unless special
termination situations arise. We describe those situations below under
“Special Situations When a Global Security Will Be Terminated.” As a result of
these arrangements, the depositary, or its nominee, will be the sole registered
owner and holder of all securities represented by a global security, and
investors will be permitted to own only beneficial interests in a global
security. Beneficial interests must be held by means of an account with a
broker, bank or other financial institution that in turn has an account with the
depositary or with another institution that does. Thus, an investor whose
security is represented by a global security will not be a holder of the
security, but only an indirect holder of a beneficial interest in the global
security.
If the
prospectus supplement for a particular security indicates that the security will
be issued as a global security, then the security will be represented by a
global security at all times unless and until the global security is
terminated. If termination occurs, we may issue the securities through
another book-entry clearing system or decide that the securities may no longer
be held through any book-entry clearing system.
Special
Considerations For Global Securities
As an
indirect holder, an investor’s rights relating to a global security will be
governed by the account rules of the investor’s financial institution and of the
depositary, as well as general laws relating to securities transfers. We
do not recognize an indirect holder as a holder of securities and instead
deal only with the depositary that holds the global security.
If
securities are issued only as global securities, an investor should be aware of
the following:
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|
·
|
an
investor cannot cause the securities to be registered in his or her name,
and cannot obtain non-global certificates for his or her interest in the
securities, except in the special situations we describe
below;
|
|
|
·
|
an
investor will be an indirect holder and must look to his or her own bank
or broker for payments on the securities and protection of his or her
legal rights relating to the securities, as we describe
above;
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·
|
an
investor may not be able to sell interests in the securities to some
insurance companies and to other institutions that are required by law to
own their securities in non-book-entry
form;
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·
|
an
investor may not be able to pledge his or her interest in the global
security in circumstances where certificates representing the securities
must be delivered to the lender or other beneficiary of the pledge in
order for the pledge to be
effective;
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|
·
|
the
depositary’s policies, which may change from time to time, will govern
payments, transfers, exchanges and other matters relating to an investor’s
interest in the global security. We and any applicable trustee have
no responsibility for any aspect of the depositary’s actions or for its
records of ownership interests in the global security. We and the
trustee also do not supervise the depositary in any
way;
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·
|
the
depositary may, and we understand that DTC will, require that those who
purchase and sell interests in the global security within its book-entry
system use immediately available funds, and your broker or bank may
require you to do so as well; and
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|
·
|
financial
institutions that participate in the depositary’s book-entry system, and
through which an investor holds its interest in the global security, may
also have their own policies affecting payments, notices and other matters
relating to the securities. There may be more than one financial
intermediary in the chain of ownership for an investor. We do not
monitor and are not responsible for the actions of any of those
intermediaries.
|
Special
Situations When A Global Security Will Be Terminated
In a few
special situations described below, a global security will terminate and
interests in it will be exchanged for physical certificates representing those
interests. After that exchange, the choice of whether to hold securities
directly or in street name will be up to the investor. Investors must
consult their own banks or brokers to find out how to have their interests in
securities transferred to their own names, so that they will be direct
holders. We have described the rights of holders and street name investors
above.
A global
security will terminate when the following special situations
occur:
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·
|
if
the depositary notifies us that it is unwilling, unable or no longer
qualified to continue as depositary for that global security and we do not
appoint another institution to act as depositary within 90
days;
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|
·
|
if
we notify any applicable trustee that we wish to terminate that global
security; or
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·
|
if
an event of default has occurred with regard to securities represented by
that global security and has not been cured or
waived.
|
The
prospectus supplement may also list additional situations for terminating a
global security that would apply only to the particular series of securities
covered by the prospectus supplement. When a global security terminates,
the depositary, and not we or any applicable trustee, is responsible for
deciding the names of the institutions that will be the initial direct
holders.
PLAN OF
DISTRIBUTION
We may
sell the securities to or through underwriters or dealers, through agents, or
directly to one or more purchasers. A prospectus supplement or supplements
will describe the terms of the offering of the securities, including, to the
extent applicable:
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·
|
the
name or names of any underwriters or
agents;
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·
|
the
purchase price of the securities and the proceeds we will receive from the
sale;
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·
|
any
over-allotment options under which underwriters may purchase additional
securities from us;
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·
|
any
agency fees or underwriting discounts and other items constituting agents’
or underwriters’ compensation;
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·
|
any
public offering price;
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·
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any
discounts or concessions allowed or reallowed or paid to dealers;
and
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·
|
any
securities exchange or market on which the securities may be
listed.
|
We may
distribute the securities from time to time in one or more transactions
at:
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|
•
|
fixed
price or prices, which may be changed from time to
time;
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|
•
|
market
prices prevailing at the time of
sale;
|
|
|
•
|
prices
related to such prevailing market prices;
or
|
Underwriters
If we use
underwriters for a sale of securities, the underwriters will acquire the
securities for their own account. The underwriters may resell the securities in
one or more transactions, including negotiated transactions, at a fixed public
offering price or at varying prices determined at the time of sale. The
obligations of the underwriters to purchase the securities will be subject to
the conditions set forth in the applicable underwriting agreement. We may offer
the securities to the public through underwriting syndicates represented by
managing underwriters or by underwriters without a syndicate. Subject to
certain conditions, the underwriters will be obligated to purchase all the
securities of the series offered if they purchase any of the securities of that
series. We may change from time to time any public offering price and any
discounts or concessions the underwriters allow or reallow or pay to dealers. We
may use underwriters with whom we have a material relationship. We will describe
the nature of any such relationship in any applicable prospectus supplement
naming any such underwriter. Only underwriters we name in the prospectus
supplement are underwriters of the securities offered by the prospectus
supplement.
We may
provide agents and underwriters with indemnification against civil liabilities
related to offerings under this prospectus, including liabilities under the
Securities Act, or contribution with respect to payments that the agents or
underwriters may make with respect to these liabilities.
Only
underwriters named in the prospectus supplement are underwriters of the
securities offered by the prospectus supplement.
Agents
We may
designate agents who agree to use their reasonable efforts to solicit purchases
of our securities for the period of their appointment or to sell our securities
on a continuing basis. We will name any agent involved in the offering and sale
of securities and we will describe any commissions we will pay the agent in the
applicable prospectus supplement. Unless the prospectus supplement states
otherwise, our agent will act on a best-efforts basis for the period of its
appointment.
We may
authorize agents or underwriters to solicit offers by certain types of
institutional investors to purchase securities from us at the public offering
price set forth in the prospectus supplement pursuant to delayed delivery
contracts providing for payment and delivery on a specified date in the
future. We will describe the conditions to these contracts and the
commissions we must pay for solicitation of these contracts in the prospectus
supplement.
We may
provide agents and underwriters with indemnification against civil liabilities
related to this offering, including liabilities under the Securities Act, or
contribution with respect to payments that the agents or underwriters may make
with respect to these liabilities. Agents and underwriters may engage in
transactions with, or perform services for, us in the ordinary course of
business.
Direct Sales
We
may also sell securities directly to one or more purchasers without using
underwriters or agents.
Trading
Markets and Listing of Securities
Unless
otherwise specified in the applicable prospectus supplement, each class or
series of securities will be a new issue with no established trading market,
other than our common stock, which is currently listed on the NYSE Amex. We may
elect to list any other class or series of securities on any exchange or market,
but we are not obligated to do so. It is possible that one or more underwriters
may make a market in a class or series of securities, but the underwriters will
not be obligated to do so and may discontinue any market making at any time
without notice. We cannot give any assurance as to the liquidity of the trading
market for any of the securities.
Stabilization
Activities
Any
underwriter may engage in overallotment, stabilizing transactions, short
covering transactions and penalty bids in accordance with Regulation M
under the Exchange Act. Overallotment involves sales in excess of the offering
size, which create a short position. Stabilizing transactions permit bids to
purchase the underlying security so long as the stabilizing bids do not exceed a
specified maximum. Short covering transactions involve purchases of the
securities in the open market after the distribution is completed to cover short
positions. Penalty bids permit the underwriters to reclaim a selling
concession from a dealer when the securities originally sold by the dealer are
purchased in a covering transaction to cover short positions. Those activities
may cause the price of the securities to be higher than it would otherwise be.
If commenced, the underwriters may discontinue any of these activities at any
time.
Any
underwriters who are qualified market makers on the NYSE Amex may engage in
passive market making transactions in the securities on the NYSE Amex in
accordance with Rule 103 of Regulation M, during the business day prior to the
pricing of the offering, before the commencement of offers or sales of the
securities. Passive market makers must comply with applicable volume and
price limitations and must be identified as passive market makers. In
general, a passive market maker must display its bid at a price not in excess of
the highest independent bid for such security. If all independent bids are
lowered below the passive market maker’s bid, however, the passive market
maker’s bid must then be lowered when certain purchase limits are
exceeded.
LEGAL
MATTERS
The
validity of the securities being offered by this prospectus will be passed upon
for us by Aboudi & Brounstein Law Offices. If the validity of any securities
is also passed upon by counsel any underwriters, dealers or agents, that counsel
will be named in the prospectus supplement relating to that specific
offering.
EXPERTS
Our
audited financial statements for the period from April 6, 2000 (inception) to
December 31, 2004, have been audited by Lane Gorman Trubitt, L.L.P., independent
registered public accounting firm, as set forth in their report thereon included
in our Annual Report on Form 10-K for the years ended December 31, 2009 and
2008. Such financial statements have been incorporated in this prospectus by
reference to our Annual Report on Form 10-K for the years ended December 31,
2009 and 2008, in reliance on the authority of said firm as experts in auditing
and accounting.
The
financial statements of Zion Oil & Gas, Inc. (a development stage
enterprise) as of December 31, 2009, 2008 and 2007, and for each of the years in
the three-year period ended December 31, 2009, and for the period from April 6,
2000 (inception) to December 31, 2009 and management’s assessment of the
effectiveness of internal control over financial reporting as of December 31,
2009 have been incorporated by reference herein in reliance upon the
reports of Somekh Chaikin, a member of KPMG International and an independent
registered public accounting firm and, with respect to the financial statements,
Lane Gorman Trubitt, L.L.P., independent registered public accounting firm,
incorporated herein by reference, and upon the authority of said firms as
experts in accounting and auditing. Such report contains an explanatory
paragraph that states that Zion is in the development stage and has no operating
revenue, limited capital resources and a loss from operations, all of which
raise substantial doubt about Zion's ability to continue as a going concern. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
WHERE
YOU CAN FIND MORE INFORMATION
We are
subject to the reporting requirements of the Exchange Act and file annual,
quarterly and current reports, proxy statements and other information with the
SEC. You may read and copy these reports, proxy statements and other information
at the SEC's Public Reference Room at 100 F Street, N.E., Washington, DC 20549.
You can request copies of these documents by writing to the SEC and paying a fee
for the copying cost. Please call the SEC at 1-800-SEC-0330 for further
information on the Public Reference Room. The SEC also maintains an Internet
site that contains reports, proxy statements and other information about
issuers, like us, who file electronically with the SEC. The address of the SEC's
web site is http://www.sec.gov
.. Our common stock is listed for trading on the NYSE Amex under the symbol
“ZN.”
We have
filed a registration statement on Form S-3 with the SEC to register the
securities that may be offered pursuant to this prospectus. This prospectus is
part of that registration statement and, as permitted by the SEC’s rules, does
not contain all of the information included in the registration statement. For
further information about us, this offering and our common stock, you may refer
to the registration statement and its exhibits and schedules as well as the
documents described herein or incorporated herein by reference. You can review
and copy these documents, without charge, at the public reference facilities
maintained by the SEC or on the SEC’s website as described above, or you may
obtain a copy from the SEC upon payment of the fees prescribed by the
SEC.
INCORPORATION
OF CERTAIN INFORMATION BY REFERENCE
The SEC
allows us to “incorporate by reference” the information we file with them, which
means that we can disclose important information to you by referring you to
those documents. The information we incorporate by reference is considered to be
an important part of this prospectus, and information that we file with the SEC
at a later date will automatically add to, update or supersede this
information.
We incorporate by reference into this prospectus the documents listed
below:
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·
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our
annual report on Form 10-K for the year ended December 31, 2009 filed with
the SEC on March 16, 2010;
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|
·
|
our
annual report on Form 10-K for the year ended December 31, 2008 and filed
with the SEC on March 31, 2009.
|
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·
|
our
definitive proxy statement filed with the SEC on April 21,
2009;
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|
·
|
our
Current Report on Form 8-K filed with the SEC on March 19,
2010;
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|
|
·
|
the
description of our common stock in our registration statement on Form 8-A
filed with the SEC on December 29, 2006, including any amendments or
reports filed for the purpose of updating such description;
and
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|
|
·
|
all
future filings that we make with the SEC under Section 13(a), 13(c), 14,
or 15(d) of the Exchange Act after the date of filing of the registration
statement on Form S-3 of which this prospectus is a part and prior to the
termination or completion of any offering of securities under this
prospectus and all applicable prospectus supplements (except, in each
case, for information contained in any such filing that is furnished and
not “filed” under the Exchange Act), which filings will be deemed to be
incorporated by reference in this prospectus, as supplemented by the
applicable prospectus supplement, and to be a part hereof from the
respective dates of such filings.
|
We will
provide without charge to each person, including any beneficial owner, to whom
this prospectus is delivered, upon written or oral request of such person, a
copy of any or all of the information that is incorporated by reference in this
prospectus. Requests for such documents should be directed to: Shareholder
Relations, Zion Oil & Gas, Inc., 6510 Abrams Rd., Suite 300, Dallas, TX
75231.
This
prospectus is part of a registration statement on Form S-3 that we filed with
the SEC. That registration statement contains more information than this
prospectus regarding us and our common stock, including certain exhibits and
schedules. You can obtain a copy of the registration statement from the SEC at
the address listed above or from the SEC’s Internet website.
You should rely only on the
information provided in and incorporated by reference into this prospectus or
any prospectus supplement. We have not authorized anyone else to provide you
with different information. You should not assume that the information in this
prospectus or any prospectus supplement is accurate as of any date other than
the date on the front cover of these documents.
$50,000,000
ZION
OIL & GAS, INC.
Common
Stock
Debt
Securities
Warrants
Units
and
Rights
PROSPECTUS
___,
2010
PART
II
INFORMATION
NOT REQUIRED IN PROSPECTUS
Item
14. Other Expenses of Issuance and Distribution.
The
following table sets forth the costs and expenses to be paid by us in connection
with the sale of the shares of common stock being registered hereby. All amounts
are estimates, except for the SEC registration fee.
|
SEC
registration fee
|
|
$
|
3,565
|
|
|
Transfer
agent’s and trustee’s fees and expenses
|
|
|
10,000
|
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Printing
and engraving expenses
|
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10,000
|
|
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Accounting
fees and expenses
|
|
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45,000
|
|
|
Legal
fees and expenses
|
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40,000
|
|
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Miscellaneous
expenses
|
|
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15,000
|
|
|
Total
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$
|
123,565
|
|
Item
15. Indemnification of Directors and Officers
Section
145 of the Delaware General Corporation Law and our certificate of incorporation
and bylaws contain provisions for indemnification of our officers and directors,
and under certain circumstances, our employees and other persons. Our bylaws
require us to indemnify such persons to the fullest extent permitted by Delaware
law. Each such person will be indemnified in any proceeding if such person acted
in good faith and in a manner that such person reasonably believed to be in, or
not opposed to, our best interests. The indemnification would cover expenses,
including attorney's fees, judgments, fines and amounts paid in settlement. Our
bylaws also provide that we may purchase and maintain insurance on behalf of any
of our present or past directors or officers insuring against any liability
asserted against such person incurred in their capacity as a director or officer
or arising out of such status, whether or not we would have the power to
indemnify such person.
We have
no other indemnification provisions in our certificate of incorporation, bylaws
or otherwise specifically providing for indemnification of directors, officers
and controlling persons against liability under the Securities Act.
Item
16. Exhibits.
See the
Exhibit Index on page II-4, which is incorporated into this registration
statement by reference.
Item
17. Undertakings.
The
undersigned registrant hereby undertakes:
(1)
To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To
include any prospectus required by Section 10(a)(3) of the Securities
Act;
(ii) To
reflect in the prospectus any facts or events arising after the effective date
of the registration statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a fundamental change
in the information set forth in the registration statement. Notwithstanding the
foregoing, any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed with the SEC
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price
represent no more than 20 percent change in the maximum aggregate offering price
set forth in the “Calculation of Registration Fee” table in the effective
registration statement; and
(iii) To
include any material information with respect to the plan of distribution not
previously disclosed in this registration statement or any material change to
such information in this registration statement.
Provided, however, that the
undertakings set forth in paragraphs (1)(i), (1)(ii) and (1)(iii) above do not
apply if the registration statement is on Form S-3 or Form F-3 and the
information required to be included in a post-effective amendment by those
paragraphs is contained in reports filed with or furnished to the SEC by the
registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange
Act of 1934 that are incorporated by reference in the registration statements or
is contained in a form of prospectus filed pursuant to Rule 424(b) that is a
part of the registration statement.
(2)
That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof;
(3)
To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering.
(4)
That, for the purpose of determining liability under the Securities
Act of 1933 to any purchaser:
(i) Each
prospectus filed by the registrant pursuant to Rule 424(b)(3) shall be deemed to
be part of the registration statement as of the date the filed prospectus was
deemed part of and included in the registration statement; and
(ii) Each
prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5), or (b)(7) as
part of a registration statement in reliance on Rule 430B relating to an
offering made pursuant to Rule 415(a)(1)(i), (vii), or (x) for the purpose of
providing the information required by section 10(a) of the Securities Act of
1933 shall be deemed to be part of and included in the registration statement as
of the earlier of the date such form of prospectus is first used after
effectiveness or the date of the first contract of sale of securities in the
offering described in the prospectus. As provided in Rule 430B, for liability
purposes of the issuer and any person that is at that date an underwriter, such
date shall be deemed to be a new effective date of the registration statement
relating to the securities in the registration statement to which that
prospectus relates, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof. Provided, however, that no
statement made in a registration statement or prospectus that is part of the
registration statement or made in a document incorporated or deemed incorporated
by reference into the registration statement or prospectus that is part of the
registration statement will, as to a purchaser with a time of contract of sale
prior to such effective date, supersede or modify any statement that was made in
the registration statement or prospectus that was part of the registration
statement or made in any such document immediately prior to such effective
date.
(5)
That, for the purpose of determining liability of the registrant
under the Securities Act of 1933 to any purchaser in the initial distribution of
the securities, the undersigned registrant undertakes that in a primary offering
of securities of the undersigned registrant pursuant to this registration
statement, regardless of the underwriting method used to sell the securities to
the purchaser, if the securities are offered or sold to such purchaser by means
of any of the following communications, the undersigned registrant will be a
seller to the purchaser and will be considered to offer or sell such securities
to such purchaser: (i) any preliminary prospectus or prospectus of the
undersigned registrant relating to the offering required to be filed pursuant to
Rule 424; (ii) any free writing prospectus relating to the offering prepared by
or on behalf of the undersigned registrant or used or referred to by the
undersigned registrant; (iii) the portion of any other free writing prospectus
relating to the offering containing material information about the undersigned
registrant or its securities provided by or on behalf of the undersigned
registrant; and (iv) any other communication that is an offer in the offering
made by the undersigned registrant to the purchaser.
(6)
That: (i) for purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of prospectus
filed as part of the registration statement in reliance upon Rule 430A and
contained in the form of prospectus filed by the registrant pursuant to
Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be
part of the registration statement as of the time it was declared effective; and
(ii) for the purpose of determining any liability under the Securities Act, each
post-effective amendment that contains a form of prospectus shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering
thereof.
(7)
That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the registrant’s annual report pursuant
to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan’s annual report pursuant to
Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by
reference in the registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial bona fide
offering thereof.
(8)
To file an application for the purpose of determining the
eligibility of the trustee to act under subsection (a) of Section 310 of the
Trust Indenture Act in accordance with the rules and regulations prescribed by
the SEC under Section 305(b)(2) of the Act.
Insofar
as indemnification for liabilities arising under the Securities Act of 1933 may
be permitted to directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
SIGNATURES
Pursuant
to the requirements of the Securities Act of 1933, the registrant certifies that
it has reasonable grounds to believe that it meets all of the requirements for
filing on Form S-3 and has duly caused this registration statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Dallas, State of Texas, on March 26, 2010.
|
ZION
OIL & GAS, INC.
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By:
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/s/ Richard Rinberg
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Name:
Richard Rinberg
Title:
Chief Executive Officer
(Principal
Executive Officer)
|
Pursuant
to the requirements of the Securities Act of 1933, as amended, this registration
statement has been signed below by the following persons in the capacities and
on the dates indicated:
|
Signature
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Title
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Date
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/s/ John M. Brown*
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Chairman of the Board of Directors
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March
26, 2010
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John M. Brown
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| |
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/s/ Richard J. Rinberg*
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Chief Executive Officer and Director
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|
March
26, 2010
|
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Richard J. Rinberg
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(Principal Executive Officer)
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| |
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/s/ Sandra Green
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Chief Financial Officer and Senior Vice President
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|
March
26, 2010
|
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Sandra Green
|
|
(Principal Financial and Accounting Officer)
|
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| |
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/s/ Paul Oroian*
|
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Director
|
|
March
26, 2010
|
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Paul Oroian
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| |
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/s/ Kent Siegel*
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Director
|
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March
26, 2010
|
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Kent Siegel
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| |
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/s/ Yehezkel Druckman*
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Director
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|
March
26, 2010
|
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Yehezkel Druckman
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/s/ Forrest A. Garb*
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Director
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March
26, 2010
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Forrest A. Garb
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/s/ Julian Taylor*
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Director
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March
26, 2010
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Julian Taylor
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* By
Sandra F. Green,
Attorney
in Fact
EXHIBIT
INDEX
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Exhibit
Number
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Description
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1.1
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Form
of Underwriting Agreement (1)
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3.1-I
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Articles
of Incorporation (incorporated herein by reference to the Company’s
Quarterly Report on Form 10-Q, for the quarter ended June 30, 2009, filed
with the SEC on August 14, 2009, Exhibits 3.1 and
3.1.2)
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3.2
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Amended
and Restated Bylaws of Zion Oil & Gas, Inc. (incorporated herein by
reference to Exhibit 3.2 to the Company’s Form 10-KSB for the year ended
December 31, 2007 as filed with the SEC on March 28,
2008)
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4.1
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Specimen
Common Stock Certificate (incorporated herein by reference to Exhibit 4.1
to the Company’s Registration Statement on Form SB-2 as filed with the SEC
on January 25, 2006)
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4.2
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Form
of Indenture for Debt Securities (1)
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4.3
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Form
of Notes (1)
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4.4
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Form
of Warrant (1)
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4.5
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Form
of Unit Agreement (1)
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4.6
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Form
of Rights Certificate (1)
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5.1
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Opinion
of Aboudi & Brounstein
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23.1
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Consent
of Aboudi & Brounstein (included in Exhibit 5.1).
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23.2
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Consent
of Lane Gorman Trubitt, L.L.P.
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23.3
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Consent
of Somekh Chaikin, independent registered public accounting firm, a member
of KPMG International
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24.1
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Power
of Attorney
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25.1
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Form
T-1 Statement of Eligibility of Trustee for Indenture under the Trust
Indenture Act of 1939 (1)
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(1)
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To
the extent applicable, to be filed by an amendment to this registration
statement or as an exhibit to a report pursuant to Section 13(a),
13(c) or 15(d) of the Exchange Act.
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